` STUDY OF COMPENSATION MANAGEMENT IN HDFC BANK
TABLE OF CONTENTS
1.
Acknowledgement
4
Certificate
5
Introduction 1.1 Objective 1.2 Limitation 1.3 Scope
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Research methodology 2.
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Details of the Project 2.1 Introduction to compensation management Company Profile 2.2 Introduction to HDFC bank Technology used in bank Business strategy
8-15 16 17-19 20-22 23-25
SWOT analysis 3.
Page no.
26-27
Discussion of observations, results and conclusions 28-41 3.1 Observation tables, Graphs, Test reports. 3.3 Conclusions 3.5 References
OBJECTIVE This project attempts to understand the objectives:-
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` To understand in details how to establish pay rates to different level of employee. To understand the impact of compensation management on performance level. A comparative study of the compensation management strategies followed in different banks.
LIMITATIONS Everything has some pros and cons and so certain limitations of this study that we could observe are as follows: The area of project work is banking sector so, the data or result may be approximate as the conclusion is based on the survey method i.e. primary & secondary source (filling of questionnaire from the employees) may be hypothetical (imaginary) data. •
The organizations which have been studied and surveyed are not providing us with full information which has hampered the result and conclusion.
•
Exact data was not been provided.
SCOPE The scope of this project is to study of the compensation management strategies in HDFC bank & to evaluate the behaviour & performance of employee on their work.
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RESEARCH DESIGN INTRODUCTION A Research Design is the framework or plan for a study which is used as a guide in collecting and analyzing the data collected. It specifies the methods and procedures for acquiring the information needed to conduct the research effectively.
RESEARCH METHODOLOGY TYPE OF DATA COLLECTED There are two types of data used. They are primary and secondary data. Primary data is defined as data that is collected from original sources for a specific purpose. Secondary data is data collected from indirect sources.
PRIMARY SOURCES Questionnaire consists of a set of questions presented to respondents. Because of its flexibility, it is by far the most common instrument used to collect primary data.
SECONDARY SOURCES These include books, the internet, the company website etc,
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SYNOPSIS
INTRODUCTION OF COMPENSATION MANAGEMENT
Compensation Management is an integral part of the management of the organization. Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction. To be effective, the managers must appreciate the value of competitive pay, their human resources, and have an investment view of payroll costs. It is of prime importance for an organization to maintain pay levels that attract and retain quality employees while recognizing the need to manage payroll costs. The literal meaning of compensation is to counter-balance. In the case of human resource management, compensation is referred to as money and other Benefits received by an employee for providing services to his employer. Money and benefits received may be in different forms-base compensation in money and various benefits, which may be associated with employee's service to the employer like provident fund, gratuity, insurance scheme and any other payment which the employee receives or benefits he enjoys in lieu of such payment. "Compensation includes direct cash payments, indirect payments in the form of employee benefits and incentives to motivate employees to strive for higher levels of productivity� Compensation is a tool used by management for a variety of purposes to further the existence and growth of the company.
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Objectives of Compensation management are:
1.Attracting and Retaining Personnel: From organization’s point of view, the
compensation management aims at attracting and retaining right personnel in the Organization Not only they require persons who are well qualified but they are also retained in the organization. There is no dirth of personnel at operative levels but the problems come at the managerial and technical levels Particularly for growing companies. Not only have they required persons who are well qualified but they are also retained in the organization. In the present day context, managerial turnover is a big problem particularly in high knowledgebase Organizations.
2. Motivating Personnel: Compensation management aims at motivating personnel
for higher productivity. Monetary compensation has its own limitations in motivating people for superior performance.
3. Optimizing Cost of Compensation: Compensation management aims at
optimizing cost of compensation by establishing some kind of linkage with performance and compensation.
4. Consistency in Compensation: Compensation management tries to achieve
consistency-both internal and external-in compensating employees. Internal consistency involves payment on the basis of criticality of jobs and employees' performance on jobs.
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Components of Compensation System Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of certain factors after analyzing the job work and responsibilities. Components of a compensation system are as follows:
SCOPE OF COMPENSATION MANAGEMENT 2
` Compensation management helps to determine the relative worth of a job in an organization in a systematic, consistent and accurate manner. It also helps in estimating the basic pay for each job in accordance with the importance of the job in the organizational hierarchy .once a basic pay is determined , the rewards , incentives and benefits attached worth the pay, positions and performance are also determined . The basic wage, incentives and rewards and benefits, together form the compensation package of an employee.
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Direct Compensation Direct compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization.
Basic Salary Salary is the amount received by the employee in lieu of the work done by him/her for a certain period say a day, a week, a month, etc. It is the money an employee receives from his/her employer by rendering his/her services
House Rent Allowance Organizations either provide accommodations to its employees who are from different state or country or they provide house rent allowances to its employees. This is done to provide them social security and motivate them to work.
Conveyance Organizations provide for cab facilities to their employees. Few organizations also provide vehicles and petrol allowances to their employees to motivate them.
Leave Travel Allowance These allowances are provided to retain the best talent in the organization. The employees are given allowances to visit any place they wish with their families. The allowances are scaled as per the position of employee in the organization.
Medical Reimbursement Organizations also look after the health conditions of their employees. The employees are provided with medi-claims for them and their family members. These medi-claims include health-insurances and treatment bills reimbursements.
Bonus Bonus is paid to the employees during festive seasons to motivate them and provide them the social security. The bonus amount usually amounts to one month’s salary of the employee.
Special Allowance Special allowance such as overtime, mobile allowances, meals, commissions, travel expenses, reduced interest loans; insurance, club memberships, etc are provided to employees to provide them social security and motivate them which improve the organizational productivity.
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Indirect Compensation
Benefits contributions may include: Medical Insurance Prescription Drug Insurance Dental Insurance Group Life Insurance Long-Term Disability Insurance Accidental Death Benefits
Tax contributions may include: Disability (Medicare) Worker Compensation Insurance, Unemployment Insurance
Retirement contributions may include: Severance Award, Voluntary or Involuntary Retirements Benefits such as VRS etc.
Fringe Benefits or Perks Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries. Where an employee exchanges (cash) wages for some other form of benefit, this is generally referred to as a 'salary sacrifice' arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree. Fringe benefits can also include but are not limited to: (employer-provided or employer-paid) housing, group insurance (health, dental, life etc.), income protection, retirement benefits, daycare, tuition reimbursement, sick leave, vacation (paid and non-paid), social security, profit sharing, funding of education, and other specialized benefits The purpose of the benefits is to increase the economic security of employees. The term perks is often used colloquially to refer to those benefits of a more discretionary nature. Often, perks are given to employees who are doing notably well and/or have seniority. Common perks are company cars, hotel stays, free refreshments, leisure activities on work time (golf, etc.), stationery, allowances for lunch, and—when multiple choices exist—first choice of such things as job assignments and vacation scheduling They may also be given first chance at job promotions when vacancies exist. Employee benefits in the United States might include relocation assistance; medical, prescription, vision and dental plans; health and dependent care flexible spending accounts; retirement benefit plans (pension, 401(k), 403(b)); group-term life and long term care insurance plans; legal assistance plans; adoption assistance; child care benefits; and possibly other miscellaneous employee discounts (e.g., movies and theme park tickets, wellness programs, discounted shopping, hotels and resorts, and so on).
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NON FINANCIAL COMPENSATION
Non-financial compensation is different incentives given to employees that are not in the form of direct pay.
Alternative Work Schedules - There are many alternatives to a traditional 5 day, 8-hour work schedule.
On-the-Job Training- Showing workers how to perform tasks by observing others. Work/Life Balance - When an employer understands the needs employees have to juggle in their lives.
Developmental Opportunities - Training and other opportunities for employees to expand their knowledge and improve their skills.
Casual Dress - Allowing employees to relax their dress code at work.
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COMPANY PROFILE
Headquarters
Bombay Area, India
Industry
Banking
Type
Public Company
Status
Operating
Company Size
40,000employees
2007 Revenues
41,190 mil [INR] (38%)
Founded Website
1994 http://www.hdfcbank.com
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INTRODUCTION OF HDFC BANK
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle’ approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment. HDFC Bank began operations in 1995 with a simple mission: to be a “World Class Indian Bank.” We realized that only a single minded focus on product quality and service excellence would help us get there. Today, we are proud to say that we are well on our way towards that goal.
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Business Focus HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values Operational Excellence, Customer Focus, Product Leadership and People. Distribution Network HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 1412 branches spread over 528 cities across India. All branches are linked on an online real-time basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centers where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has a strong and active member base. The Bank also has a network of about over 3295 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.
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Capital Structure
Rs. 550 crore
Share capital of HDFC Bank As on 31st March, 2009 Paid-up capital
Rs.425,38,41,090/-
Bank's equity
19.38%
ADS Depository
17.70 %
Foreign Institutional Investors (FIIs)
27.69 %
5,48,774.
Bank shareholders
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TECHNOLOGY USED IN HDFC BANK
In the era of globalization each and every sector faced the stiff competition from their rivals. And world also converted into the flat from the globe. After the policy of liberalization and RBI initiatives to take the step for the private sector banks, more and more changes are taking the part into it. And there are create competition between the private sector banks and public sector bank. Private sector banks are today used the latest technology for the different transaction of day to day banking life. As we know that Information Technology plays the vital role in the each and every industry and gives the optimum return from the limited resources. Banks are service industries and today IT gives the innovative Technology application to Banking industries. HDFC BANK is the leader in the industries and today IT and HDFC BANK together combined they reached the sky. New technology changed the mind of the customers and changed the queue concept from the history banking transaction. Today there are different channels are available for the banking transactions. HDFC BANK is the very consistent player in the new private sector banks. New private sector banks to withstand the competition from public sector banks came up with innovative products and superior service.
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HDFC BANK PRODUCTS PERSONAL BANKING
Loan Product
• Auto Loan • Loan Against Security • Loan Against Property • Personal loan • Credit card • 2-wheeler loan • Home loans • Tractor loan • Health Care Finance • Education Loan • Gold Loan Cards
• Credit Card • Debit Card • Prepaid Card
Deposit Product
• • • •
Saving a/c Current a/c Fixed deposit Safe Deposit Lockers
Investment & Insurance
• • • • • •
Payment Services
• • • •
Net Safe Merchant Prepaid Refill Bill pay 2
Mutual Fund Bonds Knowledge Centre Insurance General and Health Insurance
Access To Bank
• • • •
Net Banking One View ATM Phone Banking
• Direct Pay • Electronic Funds Transfer • Online Payment of Direct Tax -----------------------------Forex Services -----------------------------• Product & Services • Trade Services • Forex service Branch Locater • RBI Guidelines
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` • Branch Network
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BUSINESS STRETEGY
HDFC BANK mission is to be "a World Class Indian Bank", benchmarking themselves against international standards and best practices in terms of product offerings, technology, service levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of banking services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank's risk appetite. Bank is committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. Continue to develop new product and technology is the main business strategy of the bank. Maintain good relation with the customers is the main and prime objective of the bank.
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HDFC BANK business strategy emphasizes the following :
• Increase market share in India’s expanding banking and financial services industry by following a disciplined growth strategy focusing on quality and not on quantity and delivering high quality customer service. • Leverage our technology platform and open saleable systems to deliver more products customers and to control operating costs. • Maintain current high standards for asset quality through disciplined credit risk management. • Develop innovative products and services that attract the targeted customers and address inefficiencies in the Indian financial sector. • Continue to develop products and services that reduce bank’s Cost of funds. • Focus on high earnings growth with low volatility.
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KEY EXCUTIVE
Mr. Jagdish Capoor CEO Mr. Aditya Puri Managing Director, Director, Member of Investors Grievance (Share) Committee, Member of Fraud Monitoring Committee, Member of Premises Committee, Member of Credit Approval Committee and Member of Risk Monitoring Committee
Mr. Harish Engineer Head of Wholesale Banking, Exec. Director and Member of Customer Service Committee. Mr. Paresh Sukthankar Head of Credit, Market Risk & Investor Relations, Exec. Director and Member of Risk Monitoring Committee. Mr. Deepak S. Parekh Exec. Chairman
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SWOT ANALYSIS STRENGTH. • Superior customer service vs. competitors. • Great Brand Image • Products have required accreditations. • High degree of customer satisfaction. • Good place to work • Lower response time with efficient and effective service. • Dedicated workforce aiming at field.
making a long-term career in the
WEAKNESSES •
Some gaps in range for certain sectors.
•
Customer service staff needs training.
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Processes and systems, etc
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Management cover insufficient.
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Sectorial growth is constrained by low unemployment levels and competition for staff
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Opportunities
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Profit margins will be good.
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Could extend to overseas broadly.
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New specialist applications.
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Could seek better customer deals.
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Fast-track career development opportunities on an industry-wide basis.
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An applied research centre to create opportunities for developing techniques to provide added-value services.
Threats
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Legislation could impact.
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Great risk involved
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Very high competition prevailing in the industry.
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Vulnerable to reactive attack by major competitors.
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Lack of infrastructure in rural areas could constrain investment. High volume/low cost market is intensely competitive.
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` QUESTIONNAIRE FILLED BY EMPLOYEES
1. When was your organization established?
2. What types of compensation are available?
Analysis: There are two type of compensation are available are direct or indirect compensation. Direct includes Base Pay,Commissions,Overtime Pay, Bonuses, Travel/Meal/Housing Allowance and indirect compensation includes vacation, leaves, retirement, taxes.
3. Who handle the compensation management department in your organization? _______MANAGER__________________________________________
Analysis: The manager handle the compenstation management department in their organization.
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` 4. On what basis company provide compensation to their employees. a) Base Pay
b) Commissions
c) Travelling/meal/housing allowance
d) Any other
Sales 0% Base Pay
20% 0%
Commissions Travelling/meal/housing allowance
80%
Any other
Analysis:
This graph shows that company provide compensation to their employees on the basis of base pay & Travelling/meal/housing allowance.80% of employee prefer Travelling/meal/housing allowance & only 20% of employee prefer base pay.
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` 5. What kind of compensation you prefer. a) Monetary
b) Rewarding
c) Motivation
d) Holiday packages
Analysis:
From the chart above we find that, 67% of employee prefers monetary benefits & only 33% of employee are happy & satisfied with non monetary benefits like rewards. In this company neither the employee are motivated nor are they satisfied with holiday package as compensation.
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` 6. Are you satisfied with the compensation you receive. a) Yes
b) No
Analysis:
From the chart given above we can clearly see that 80% of employees are satisfied with the compensation they receives & only 20% of employees are dissatisfied with the compensation they receives.
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` 7. What do you think that HDFC is providing better compensation package to the employees. a) Yes
b) No
If “NO� than which organization do you think?
Analysis:
Yes, HDFC is providing better compensation package to the employees out of 10
employee % of employees are satisfied with the compensation they get and % of employee are dissatisfied with the compensation provided by the company.
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` 8. Is there different type of compensation for different type of services.
a) Yes
b) No
100%
0%
YES NO
Analysis:
Yes, there are different types of compensation for different type of services like direct and indirect compensation provided to the employee of the organization for increasing their motivation and retention of employees.
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` 9. Is cash still king in employee compensation.
a) Yes
b) No
Analysis:
From the chart given above we can clearly see that the cash is still king there because everyone is satisfied with the monetary motivation and not by non monetary motivation. Here we can see that 90% of employees are satisfied with monetary value rather than
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` 10. Is Compensation based more on group performance and less on individual contribution. a) Yes
b) No
Analysis:
In this organization compensation is based more on individual contribution because every employee is single entity there and they are judge on the basis of self performance.
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` 11. Is there any procedure of receiving formal feedback by employees on Company policies, compensation, benefits, and employee attitudes. a) Yes
b) No
Analysis:
Yes, there are procedure of receiving formal feedback by employees on Company policies, compensation, benefits, and employee attitudes. It helps in bringing out new ideas. It also helps in improving employee and management relationship number of ideas helps in choosing the better option from them which will be more effective and beneficial for the organisation.
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` 12. In your organization employees receive effective performance appraisal.
a) Yes
b) No
Sales
YES
NO
Analysis:
Yes, in our organization employee receive effective performance appraisal because it give pleasure to the employee by rewards and they also get motivated which leads to the effective performance.It enhances effectiveness of employees and boosts the confidence level of employees.
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` 13. Are you getting training for improving the performance.
a) Yes
b) No
c) can’t say
Analysis:
Yes, tanning help in improving the performance of employee. It helps in developing skills & motivation level of employees. It also provides practical knowledge. It is necessary for the organization to provide training to their employees for better performance and update employee time to time. It helps in increase in the performance & motivation level of employee and also enhance effectiveness of employees.
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` 14. Are you free to give ideas to the higher management. a) Yes
b) No
Analysis:
Yes, the employees are free to give ideas and suggestions to the higher management. By this new and different ideas are bring out of the box and this help in taking better decision which may be beneficial for the organization. It also boosts the confidence level of employees and their ideas are entertained so they get motivated also.
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FINDINGS
The compensation management policy is good in HDFC bank. The employee of the organization is satisfactory to the employees. The employees are motivated because of the environment of the organization. The products of HDFC bank have good credibility in the region.
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CONCLUSION
HDFC is first life insurance Company in India. It has businesses spread out across the globe. The company faces a large amount of competition. The Compensation Committee reviews the overall compensation structure and policies of the Bank with a view to attract, retain and motivate employees, consider grant of stock options to employees, reviewing compensation levels of the bank's employees. The project was very satisfying experience for me, not only practically and academically. It also helped me in enriched my knowledge also. The Bank's compensation policy is to provide a fair and consistent basis for motivating and rewarding employees appropriately according to their job / role size, performance, contribution, skill and competence.
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REFERENCES
Personnel management“Dr. C.B. Mamoria” Ex.prof.and head of department. www.HDFC.com
www.google.com www.wikipedia.com
QUESTIONNAIRE 2
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1. When was your organization established? ______________________________________________________________ 2. What types of compensation are available? 3. Who handle the compensation management department in your organization? ________________________________________________________ 4. On what basis company provide compensation to their employees? a)Base Pay
b)Commissions
c)Travel/Meal/Housing Allowance
d)Any other
5. What kind of compensation you prefer? a) Monetary
b) Rewarding
c) Motivation
d) Holiday packages
6. Are you satisfied with the compensation you receives? a) Yes
b) No
7. What do you think that HDFC is providing better compensation package to the employees? a) Yes
b) No
If “NO� than which organization do you think.
8. .Is there different type of compensation for different type of services? a) Yes
b) No
9. Is cash still king in employee compensation? a)Yes
b) No
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` 10. Is Compensation based more on group performance and less on individual contribution? a)Yes
b) No
11. Is there any procedure of receiving formal feedback by employees on Company policies, compensation, benefits, employee attitudes? a) Yes b) No 12. In your organization employee receive effective performance appraisal? a) Yes
b) No
13. Are you getting training for improving the performance?
a) Yes
b) No
c) can’t say
14. Are you free to give ideas to the higher management? a) Yes
b) No
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