OB and its Nature

Organizational behavior-Definition &
Nature
Organizational behavior- it is made out of
two words “organization” and “behavior.”
What is an organization?
Organization as two or more individuals who
are interacting with each other within a
deliberately structured set up and working in
an interdependent way to achieve some
common objective/s. Organizations play a
major role in pur lives. We possibly cannot
think of a single moment in our lives when we
are not depending on rganizations in some
form or the other. Right from the public
transport that you use to come to your
institute, the institutes itself, the class you are
attending at this moment, are all examples of
organizations.
What is Behavior?
It is the behavior of the people working in an
organization to achieve common goals or
objectives. Organization comprises of people
with different attitudes, cultures, beliefs,
norms and values.
So let us understand organizational behavior
and what it exactly it means. “Organizational
Behavior” cam be defined as the study of what
people think, feel, and do in and around
organizations. The study of Organizational
Behavior facilitates the process of explaining,
understanding) predicting, maintaining, and
changing employee behavior in an
organizational setting. The value of
organizational behavior is that: it isolates
important aspects of the
manager’s job and offers specific perspective
on the human side of management:
• People as organizations,
• People as resources,
• People as people
In other words, it involves the understanding,
prediction and control of human behavior and
factors affecting their performance and
interaction among the organizational members.
And because organizational behavior is
concerned specifically with employment –
related situations, you should not be surprised
to find that it emphasizes behavior as related-
to concerns such as jobs, work, absenteeism,
employment turnover, productivity, human
performance and management
Nature of Organizational Behavior (OB)
Organizational behavior is an applied
behavioral science that is built on
contributions from a number of behavioral
disciplines such as psychology, sociology,
social psychology, anthropology and
economics.
Psychology
Psychology is the study of human behavior
which tries to identify the characteristics of
individuals and provides an understanding why
an individual behaves in a particular way. This
thus provides us with useful insight into areas
such as human motivation, perceptual
processes or personality characteristics.
Sociology
Sociology is the study of social behavior,
relationships among social groups and
societies, and the maintenance of social order.
The main focus of attention is on the social
system.
This helps us to appreciate the functioning of
individuals within the organization which is
essentially a socio-technical entity.
Social psychology
Social psychology is the study of human
behavior in the context of social situations.
This essentially addresses the problem of
understanding the typical behavioral patterns
to be expected from an individual when he
takes part in a group.
Anthropology
Anthropology is the science of mankind and
the study of human behavior as a whole. The
main focus of attention is on the cultural
system, beliefs, customs, ideas and values
within a group or society and the comparison
of behavior among different cultures. In the
context of today’s organizational scenario. It is
very important to appreciate the differences
that exist among people coming from different
cultural backgrounds as people are often found
to work with others from the other side of the
globe.
Economics
Any organization to survive and sustain must
be aware of the economic viability of their
effort. This applies even to the non-profit and
voluntary organizations as well.
Political Science
Although frequently overlooked, the
contributions of political scientists are
significant to the understand arrangement in
organizations. It studies individuals and groups
within specific conditions concerning the
power dynamics. Important topics under here
include structuring of conflict, allocation of
power and how people manipulate power for
individual self-interest etc.

Introduction to ORGANISATIONAL BEHAVIOR (OB)

Organisational Behavior

OB is the study and application of knowledge about the human behavior in order to obtain organisational effectiveness.

As we know that many people come together at the workplace. They come from diverse backgrounds, diverse religions, diverse regions. Different people have different values, beliefs, tastes and ideas. All these factors make up a structure that shapes the behavior of the people. OB strives to understand this structure. OB strives to understand these factors. OB strives to know what makes up a particular behavior in an individual level and how beneficial or detrimental is that behavior to the organisation. OB studies about the behavior of individuals in order to change them favourably. Hence, OB is the study of the various factors that make up the behaviour of individuals and then the application of the knowledge obtained in order to mould their behavior in such a way so as to make it beneficial to the organisational effectiveness.

OB also studies how people behave differently at their individual level and at the workplace or organisational level. OB understands all causes.

OB is a subject that consists of studies varying from Anthropology, Psychology, Industrial Relations, History, Sociology, etc. The roots of OB lie as back as the advent of Scientific Management and Human Relations Movement of 1940. Today, OB is studied at colleges and universities as a full-fledged subject and is practically applied at organisations.

Characteristics of a Contract of Guarantee

Characteristics or essentials of contract of
guarantee
Following are the characteristics or essentials
of contract of guarantee:
i. Tripartite agreement: In a contract of
guarantee, there are three parties namely:
principal creditor, creditor and surety. Under
this contract, three separate contracts are
made among them and consent of all the three
parties is necessary. The contracts connecting
each-other as contract between:
a. the principal debtor and creditor,
b. the creditor and surety, and
c. the surety and principal debtor,
ii. Liability: Under such contract the primary
liability is of the principal debtor and only
secondary liability is of the surety. As a
conditional contract, liability of the surety
arises only when the principal debtor
(primarily liable) defaults.
iii. Essentials of valid contract: It is also as
same as other general contract in respect of
essentials. All the requirements for valid
contract, i.e. free consent, consideration,
lawful object, competency of the parties etc.
are necessary to form this kind of contract.
But, in respect of consideration, no direct
consideration in the contract between the
surety and creditor. Consideration of principal
debtor is considered to be adequate for the
surety.
iv. Written form: A contract relating to
guarantee must be concluded in writing in
Nepal and England. But, the Indian legal
framework does not compel to form such
contract in written form. Both written and oral
is valid in India.

Parties to Contract of Guarantee

A Contract to perform the promise, or
discharge the liability, of a third person in
case of his default is called Contract of
Guarantee . A guarantee may be either oral
or written.
The person who gives the guarantee is called
the Surety
The person on whose default the guarantee
is given is called the Principal Debtor
The person to whom the guarantee is given
is called the Creditor

Contract of Guarantee, Meaning and Definition

A Contract of guarantee is a contract to
perform the promise, or discharge the liability,
of a third person in case of his default. The
person who gives the guarantee is called the
surety; the person in respect of whose default
the guarantee is given is called the principal
debtor, and the person to whom the guarantee
is given is called the creditor. A guarantee may
be either oral or written. [section 126]. - -
[Person giving guarantee is also called as
guarantor. However, Contract Act uses the
word surety which is same as guarantor]. - -
Three parties are involved in contract of
guarantee. Contract between any two of them
is not a contract of guarantee. It may be
contract of indemnity. Primary liability is of
the principal debtor. Liability of surety is
secondary and arises when Principal Debtor
fails to fulfill his commitments.

Channel Management

Product distribution (or place) is one of the
four elements of the marketing mix .
Distribution is the process of making a product
or service available for use or consumption by
a consumer or business user, using direct
means, or using indirect means with
intermediaries.
The other three parts of the marketing mix are
product , pricing and promotion.
Channels and intermediaries
Distribution of products takes place by means
of channels. Channels are sets of
interdependent organizations (called
intermediaries) involved in making the product
available for consumption.[1] Merchants are
intermediaries that buy and resell products.
Agents and brokers are intermediaries that act
on behalf of the producer but do not take title
to the products.
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Channel design
A firm can design any number of channels.
Channels are classified by the number of
intermediaries between producer and
consumer. [1] A level zero channel has no
intermediaries. This is typical of direct
marketing . A level one channel has a single
intermediary. This flow is typically from
manufacturer to retailer to consumer.
Types
Category
Definition
Intensive distribution
the producer's products are stocked in the
majority of outlets. [1] This strategy is
common for basic supplies, snack foods,
magazines and soft drink beverages.
Selective distribution
means that the producer relies on a few
intermediaries to carry their product. [1] This
strategy is commonly observed for more
specialised goods that are carried through
specialist dealers, for example, brands of
craft tools, or large appliances.
Exclusive distribution
means that the producer selects only very few
intermediaries. [1] Exclusive distribution is
often characterised by exclusive dealing where
the reseller carries only that producer's
products to the exclusion of all others. This
strategy is typical of luxury goods retailers
such as Gucci.
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Channel mix
In practice, many organizations use a mix of
different channels; in particular, they may
complement a direct sales-force, calling on the
larger accounts, with agents, covering the
smaller customers and prospects. In addition,
online retailing or e-commerce is leading to
disintermediation. Retailing via smartphone or
m-commerce is also a growing area.
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Managing channels
The firm's marketing department needs to
design the most suitable channels for the
firm's products, then select appropriate
channel members or intermediaries. The firm
needs to train staff of intermediaries and
motivate the intermediary to sell the firm's
products. The firm should monitor the
channel's performance over time and modify
the channel to enhance performance.
Channel motivation
To motivate intermediaries the firm can use
positive actions, such as offering higher
margins to the intermediary, special deals,
premiums and allowances for advertising or
display.[1] On the other hand, negative actions
may be necessary, such as threatening to cut
back on margin, or hold back delivery of
product.
Channel conflict
Channel conflict can arise when one
intermediary's actions prevent another
intermediary from achieving their objectives.
[1] Vertical channel conflict occurs between
the levels within a channel and horizontal
channel conflict occurs between intermediaries
at the same level within a channel.

Functions of Channel Members

Functions of channel Members

There are numerous functions performed by
channel members. All of these function utilize
scarce resources of the organization.
Furthermore, these functions can be better
performed through specialization in the
function or through expertise of the function.
And on top of it each function can be
transferred within the various channel
members.
Main functions of channel members in channel
distribution are
1. Risk taking – Assuming the risk connected
with carrying out channel work or being
a part of a channel
2. Financing – Acquiring funds to finance
for inventories
3. Physical distribution of goods – Storage
and movement of physical goods
4. Negotiations – Reaching an agreement on
pricing and other terms which may be a
part of the transaction
5. Matching – Placing order with the
manufacturers and matching the orders
to the actual requirement.
6. Contacts – Maintaining contacts with
existing customers as well establishing
contacts with potential customers and
maintaining the same with the regulatory
bodies
7. Promotions – Carrying out effective
communications to stimulate purchasing
8. Information – Gathering information
about potential customers, competition
as well as tracking the environmental
factors
As we can see, the more specialized a channel
member is, the better he will perform in any
of the above given functions. Also the
functions are such that they can be shifted
within various channel members.

Distribution Channels and its Kinds

Marketing channels are the ways that goods
and services are made available for use by the
consumers. All goods go through channels of
distribution, and your marketing will depend
on the way your goods are distributed. The
route that the product takes on its way from
production to the consumer is important
because a marketer must decide which route
or channel is best for his particular product.
Manufacturer to Customer
Manufacturer makes the goods and sells them
to the consumer directly with no intermediary,
such as a wholesaler, agent or retailer. Goods
come from the manufacturer to the user
without an intermediary. For example, a
farmer may sell some produce directly to
customers. For example, a bakery may sell
cakes and pies directly to customers.
Manufacturer to Retailer to Consumer
Purchases are made by the retailer from the
manufacturer and then the retailer sells the
merchandise to the consumer. This channel is
used by manufacturers that specialize in
producing shopping goods. For example,
clothes, shoes, furniture and fine china. This
merchandise may not be needed immediately
and the consumer may take her time and try
on the items before making a buying decision.
Manufacturers that specialize in producing
shopping goods prefer this method of
distribution.
Manufacturer to Wholesaler to Customer
Consumer’s can buy directly from the
wholesaler. The wholesaler breaks down bulk
packages for resale to the consumer. The
wholesaler reduces some of the cost to the
consumer such as service cost or sales force
cost, which makes the purchase price cheaper
for the consumer. For example, shopping at
some of the warehouse clubs, the customer
may have to buy a membership in order to buy
directly from the wholesaler.
Manufacturer to Agent to Wholesaler to
Retailer to Customer
Distribution that involves more than one
intermediary involves an agent called in to be
the middleman and assist with the sale of the
goods. An agent receives a commission from
the producer. Agents are useful when goods
need to move quickly into the market soon
after the order is placed. For example, a
fishery makes a large catch of seafood; since
fish is perishable it must be disposed of
quickly. It is time consuming for the fishery to
contact many wholesalers all over the country
so he contacts an agent. The agent distributes
the fish to the wholesalers. The wholesalers
sell to retailers and then retailers sell to
consumers.

Contract of Indemnity

Definition

The Contracts of Indemnity has been
defined as: "A Contract whereby one party
promises to save the other from loss caused
to him by the conduct of the promisor
himself or by the conduct of any other
person, is called a contract of indemnity ."
Indemnity , in simple words, is protection
against future loss.
The person who promises to save the other
is called the Indemnitor or Indemnifier
and the person who is compensated is the
Indemnitee , Indemnified or the
indemnity-holder . An indemnity can be
defined as a sum paid by A to B by way of
compensation for a particular loss suffered
by B. A, the indemnitor may or may not be
responsible for the loss suffered by the B,
the indemnitee.

Forms of indemnity include
cash payments, repairs, replacement, and
reinstatement.
Contract of Indemnties should all satisfy the
conditions of a valid contract .
All Contracts of Insurance are Contracts of
Indemnity except life insurance.

Rights

Rights of Indemnified or Indemnity
Holder
all damages which he may be compelled to
pay in any suit in respect of any matter to
which the promise to indemnify applies;
all costs which he may be compelled to pay
in any such suit if, in bringing or defending
it, he did not contravene the orders of the
promisor, and acted as it would have been
prudent for him to act in the absence of any
contract of indemnity, or if the promisor
authorised him to bring or defend the suit;
all sums which he may have paid under the
terms of any compromise of any such suit,
if the compromise was not contrary to the
orders of the promisor, and was one which
it would have been prudent for the
promisee to make in the absence of any
contract of indemnity, or if the promisor
authorised him to compromise the suit.
The indemnity holder can call upon the
indemnifier to save him from loss even
before the actual loss is incurred.

Rights of Indemnifier

The Indian Contract act remains silent on this matter.

Contract of Indemnity as per Indian
Contract Act

Section 124 of Indian Contract Act, 1872
defines Contract of indemnity.
Section 125 of Indian Contract Act, 1872
specifies the Rights of indemnity-holder
when sued
Sections in the Indian Contract Act, 1872

Personal Selling

Personal selling is where businesses use people
(the “sales force”) to sell the product after
meeting face-to- face with the customer.
The sellers promote the product through their
attitude, appearance and specialist product
knowledge. They aim to inform and encourage
the customer to buy, or at least trial the
product.
A good example of personal selling is found in
department stores on the perfume and
cosmetic counters.
A customer can get advice on how to apply the
product and can try different products.
Products with relatively high prices, or with
complex features, are often sold using
personal selling. Great examples include cars,
office equipment (e.g. photocopiers) and many
products that are sold by businesses to other
industrial customers.
The main advantages and disadvantages of
personal selling can be summarised as follows:
Advantages
Disadvantages
High customer attention
Message is customised
Interactivity
Persuasive impact
Potential for development of relationship
Adaptable
Opportunity to close the sale
High cost
Labour intensive
Expensive
Can only reach a limited number of customers
Point-of-sale merchandising can be said to be a
specialist form of personal selling. POS
merchandising involves face-to-face contact
between sales representatives of producers and
the retail trade.
A merchandiser will visit a range of suitable
retail premises in his/her area and encourage
the retailer to stock products from a range.
The visit also provides the opportunity for the
merchandiser to check on stock levels and to
check whether the product is being displayed
optimally.

Direct Marketing

Direct marketing is a staple for businesses -
especially for nonprofits. If you have ever
been called during the dinner hour by a
telemarketer you have been the target of direct
marketing.
Often considered annoying and invasive by
consumers, direct marketing is an aggressive
form of marketing that only works when
carefully planned and implemented.
1. What is Direct Marketing?
Direct marketing is just what it sounds like -
directly reaching a market (customers and
potential customers) on a personal (phone
calls, private mailings) basis, or mass-media
basis (infomercials, magazine ads, etc.).
Direct marketing is often distinguished by
aggressive tactics that attempt to reach new
customers usually by means of unsolicited
direct communications. But it can also reach
out to existing or past customers. A key factor
in direct marketing is a "call to action." That
is, direct marketing campaigns should offer an
incentive or enticing message to get consumers
to respond (act).
Direct marketing involves the business
attempting to locate, contact, offer, and make
incentive-based information available to
consumers.
2. Types of Direct Marketing
Three main types of direct marketing include:
Other types of direct marketing include:
distributing flyers; door-to-door solicitations;
curbside stands; FAX broadcasting; television
marketing (i.e., infomercials); coupon ads in
print media; and voice mail marketing.
3. Does Direct Marketing Work?
That depends on how you define "work."
Direct marketing does ensure people know
about your business. But aggressive,
misleading, or annoying direct marketing can
leave people with a bad impression about your
business.
Be sure to adhere to privacy and contact laws
because there are stiff fines and penalties for
direct marketers that violate direct marketing
laws.
4. Should I Consider Direct Marketing?
Every business owner should consider direct
marketing. However, the type of direct
marketing that will work for your business
depends on your industry, your business
ethics, and your budget.

Sales Promotion

Author: Jim Riley
Last updated: Sunday 23
September, 2012

Marketing - Sales promotion
Sales promotion is the process of persuading
a potential customer to buy the product.
Sales promotion is designed to be used as a
short-term tactic to boost sales – it is not
really designed to build long-term customer
loyalty.
Some sales promotions are aimed at
consumers. Others are targeted at
intermediaries (such as agents and wholesalers)
or at the firm’s sales force.
When undertaking a sales promotion, there are
several factors that a business must take into
account:

What does the promotion cost – will the
resulting sales boost justify the investment?
Is the sales promotion consistent with
the brand image? A promotion that heavily
discounts a product with a premium price
might do some long-term damage to a
brand
Will the sales promotion attract
customers who will continue to buy the
product once the promotion ends, or will it
simply attract those customers who are
always on the look-out for a bargain?
There are many methods of sales promotion,
including:
Money off coupons – customers receive
coupons, or cut coupons out of newspapers
or a products packaging that enables them
to buy the product next time at a reduced
price
Competitions – buying the product will
allow the customer to take part in a chance
to win a prize
Discount vouchers – a voucher (like a
money off coupon)
Free gifts – a free product when buy
another product
Point of sale materials – e.g. posters, display
stands – ways of presenting the product in
its best way or show the customer that the
product is there.
Loyalty cards – e.g. Nectar and Air Miles;
where customers earn points for buying
certain goods or shopping at certain
retailers – that can later be exchanged for
money, goods or other offers
Loyalty cards have recently become an
important form of sales promotion. They
encourage the customer to return to the
retailer by giving them discounts based on the
spending from a previous visit. Loyalty cards
can offset the discounts they offer by making
more sales and persuading the customer to
come back. They also provide information
about the shopping habits of customers –
where do they shop, when and what do they
buy? This is very valuable marketing research
and can be used in the planning process for
new and existing products.

The main advantages and disadvantages of
sales promotion are:

Advantages
Disadvantages
Effective at achieving a quick boost to sales
Encourages customers to trial a product or
switch brands
Sales effect may only be short-term
Customers may come to expect or anticipate
further promotions
May damage brand image

SALES PROMOTION

Sales promotion is one of the seven aspects of
the promotional mix. (The other six parts of
the promotional mix are advertising, personal
selling , direct marketing , publicity/public
relations, corporate image and exhibitions.)
Media and non-media marketing
communication are employed for a pre-
determined, limited time to increase consumer
demand, stimulate market demand or improve
product availability. Examples include contests ,
coupons , freebies, loss leaders, point of
purchase displays, premiums , prizes, product
samples , and rebates
Sales promotions can be directed at either the
customer, sales staff, or distribution channel
members (such as retailers ). Sales promotions
targeted at the consumer are called consumer
sales promotions. Sales promotions targeted
at retailers and wholesale are called trade
sales promotions. Some sale promotions,
particularly ones with unusual methods, are
considered gimmicks by many.
Sales promotion includes several
communications activities that attempt to
provide added value or incentives to
consumers, wholesalers, retailers, or other
organizational customers to stimulate
immediate sales. These efforts can attempt to
stimulate product interest, trial, or purchase.
Examples of devices used in sales promotion
include coupons, samples, premiums, point-of-
purchase (POP) displays, contests, rebates, and
sweepstakes.
Consumer sales promotion techniques
Price deal: A temporary reduction in the
price, such as 50% off.
Loyal Reward Program: Consumers collect
points, miles, or credits for purchases and
redeem them for rewards.
Cents-off deal: Offers a brand at a lower
price. Price reduction may be a percentage
marked on the package.
Price-pack deal: The packaging offers a
consumer a certain percentage more of the
product for the same price (for example, 25
percent extra).
Coupons: coupons have become a standard
mechanism for sales promotions.
Loss leader : the price of a popular product
is temporarily reduced in order to stimulate
other profitable sales
Free-standing insert (FSI): A coupon booklet
is inserted into the local newspaper for
delivery.
On-shelf couponing: Coupons are present at
the shelf where the product is available.
Checkout dispensers: On checkout the
customer is given a coupon based on
products purchased.
On-line couponing: Coupons are available
online. Consumers print them out and take
them to the store.
Mobile couponing: Coupons are available on
a mobile phone. Consumers show the offer
on a mobile phone to a salesperson for
redemption.
Online interactive promotion game:
Consumers play an interactive game
associated with the promoted product.
Rebates : Consumers are offered money back
if the receipt and barcode are mailed to the
producer.
Contests/sweepstakes/games: The consumer
is automatically entered into the event by
purchasing the product.
Point-of-sale displays:-
Aisle interrupter: A sign that juts into
the aisle from the shelf.
Dangler: A sign that sways when a
consumer walks by it.
Dump bin: A bin full of products
dumped inside.
Glorifier: A small stage that elevates a
product above other products.
Wobbler: A sign that jiggles.
Lipstick Board: A board on which
messages are written in crayon.
Necker: A coupon placed on the 'neck'
of a bottle.
YES unit: "your extra salesperson" is a
pull-out fact sheet.
Electroluminescent: Solar-powered,
animated light in motion.

Kids eat free specials: Offers a discount on
the total dining bill by offering 1 free kids
meal with each regular meal purchased.
Sampling: Consumers get one sample for
free, after their trial and then could decide
whether to buy or not.
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Trade sales promotion techniques
Trade allowances: short term incentive
offered to induce a retailer to stock up on a
product.
Dealer loader: An incentive given to induce
a retailer to purchase and display a product.
Trade contest: A contest to reward retailers
that sell the most product.
Point-of-purchase displays: Used to create
the urge of "impulse" buying and selling
your product on the spot.
Training programs: dealer employees are
trained in selling the product.
Push money: also known as "spiffs". An
extra commission paid to retail employees
to push products.
Trade discounts (also called functional
discounts): These are payments to distribution
channel members for performing some
function .

WAGE AND SALARY ADMINISTRATION: OBJECTIVES, PRINCIPLES

Wage and salary administration affect levels
of employee commitment to the organisation.
However, fascinating the individual’s job
assignment is, the employee must be paid. Pay
affects the way people work-how much and
how well. A large part of the compensation
that people receive from work is monetary.
Although managers are expected to conserve
money and distribute it wisely, many
employees feel that they should get more of it
for what they do. Wages, salaries and many
employee benefits and services are form of
compensation.
Administration of employee compensation is
called wage and salary administration.
According to D.S. Beach “Wage and Salary
Administration refers to the establishment
and implementation of sound policies and
practices of employee compensation. It
includes such areas as job evaluation, surveys
of wage and salaries, analysis of relevant
organizational problems, development and
maintenance of wage structure, establishing
rules for administrating wages, wage payment
incentives, profit sharing, wage changes and
adjustments, supplementary payments, control
of compensation costs and other related
items.”
The wage and salary administration aims to
establish and maintain an equitable wage and
salary structure and an equitable labor cost
structure.
Objectives of Wage and Salary
Administration :
A sound plan of wage and salary administration
seeks to achieve the following objectives :
To establish a fair and equitable
compensation offering similar pay for similar
work.
To attract competent and qualified
personnel.
To retain the present employees by keeping
wage levels in tune with competitive units.
To keep labor and administrative costs in
line with the ability of the organization to pay.
To improve motivation and morale of
employees and to improve union management
relations.
To project a good image of the company and
to comply with legal needs relating to wages
and salaries.
To establish job sequences and lines of
promotion wherever applicable.
To minimize the chances of favoritism while
assigning the wage rates.
Principles of Wage and Salary
Administration :
The following principles should be followed for
an effective wage and salary administration ;
Wage policy should be developed keeping in
view the interests of all concerned parties viz.,
employer, employees, the consumers and the
society.
Wage and salary plans should be sufficiently
flexible or responsive to changes in internal
and external conditions of the organization.
Efforts should be made to ensure that
differences in pay for jobs are based on
variations in job requirements such as skill,
responsibility, efforts and mental and physical
requirements.
Wage and salary administration plans must
always be consistent with overall
organizational plans and programmes.
Wage and Salary administration plans must
always be in conformity with the social and
economic objectives of the country like
attainment of equality in income distribution
and controlling inflation, etc.
These plans and programmes should be
responsive to the changing local and national
conditions.
Wage and salary plans should expedite and
simplify administrative process.
Workers should be associated, as far as
possible, in formulation and implementation of
wage policy.
An adequate data base and a proper
organizational set up should be developed for
compensation determination and
administration.
The general level of wages and salaries
should be reasonably in line with that
prevailing in the labor market.
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.
The workers should receive a guaranteed
minimum wage to protect them against
conditions beyond their control.
Prompt and correct payments to the
employees should be ensured and arrears of
payment should not accumulate.
The wage and salary payments must fulfill a
wide variety of human needs including the
need for self actualization.
Wage policy and programme should be
reviewed and revised periodically in conformity
with changing needs. For revision of wages, a
wage committee should also be preferred to
the individual judgement however unbiased of
a manager.

References: Scribd.com

FRINGE BENEFITS

The Concept of
Fringe Benefits

The human concept of labor has been
recognized widely in the industrial world. The
employer, though not bound, provides several
benefits and services to the employees,
working in the organization to maintain and
promote the employees’ favorable attitude
towards the work and work environment,
because maintenance of favorable attitude
towards the work and work environment,
because maintenance of favorable attitude is
an essential part of motivation and high
morale. Such benefits and services, being a
part of wage and salary administration, include
all expenditure incurred to benefit employees
over and above regular wages and direct
monetary incentives related to output and are
generally referred to as fringe benefits. The
real wages of workers are increased by the
benefits provided by the employer and thus,
they are regarded as supplement to their
wages. Many years ago, benefits and services
were labeled ‘fringe’ benefits because they
were relatively insignificant or fringe
components of compensation. However, the
situation now is different, as these have, more
or less, become important part of a
comprehensive compensation package offered
by employers to employees.
Fringe benefit is a benefit which supplements
the employees’ ordinary wages and which is of
value to them and their families in so far as it
materially increases their retirement benefits.
According to the Glossary of Industrial
Relations and Wage Terms “Fringe benefits
are supplements to wages received by workers
at a cost to the employers. The term
encompasses a number of benefits-paid
vacation, pension, health insurance plans, etc.
which usually add up to something more than
a ‘fringe’ and is sometimes applied to a
practice that may constitute a dubious benefit
for workers.”
Features of Fringe Benefits
Fringe benefits are supplementary to regular
wages or salaries.
These benefits are paid to all the employees
based on this membership in the organization.
These benefits are indirect compensation
because these are usually extended as a
condition of employment and are not directly
related to performance.
Fringe benefits involve a labor cost for the
employer and are not meant directly to
improve efficiency.
Fringe benefits raise the living standard of
the employees.
Fringe benefits refer to items for which a
direct monetary value to the employee can be
ascertained eg. Provident funds, pension, etc.
On the other hand, services refers to the items
like medical facilities, recreation, etc.
These benefits may be statutory or
voluntary.
Objectives of Fringe Benefits
Fringe benefits are given to achieve the
following objectives.
1. To recruit and retain the best employees.
2. To protect employees against certain
hazards e.g. life insurance , old age pension,
etc.
3. To improve motivation and morale of the
employees by satisfying some unsatisfied
needs.
4. To improve work environment and
industrial relations.
5. To ensure health, safety and welfare of
employees.
6. To develop a sense of belongingness and
loyalty among workers.
7. To meet statutory requirements.
8. To satisfy the demands of trade unions.
9. To improve the public image of the
organization.
Kinds of Fringe Benefits :
The benefits and services to be included under
the title ‘fringe benefits’ are numerous. A few
of them are – Bonus for quality and
attendance, contribution to group insurance
plan, lay off and termination pay, travel
expenses, suggestion awards, medical leave
with pay, overtime, university and trade
courses, etc.
The Chamber of Commerce, USA has included
5 types of benefits under fringe benefits.
1. Statutory payments such as old age pension
unemployment insurance, group insurance,
etc.
2. Payment for pension and labor welfare
3. Rest or leave with pay
4. Payment for time not worked
5. Other benefits such as profit sharing,
suggestions reward, reimbursement of tuition
fees, festival allowance, etc.

Reference: Scribd.com

STUDY MATERIAL

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