This topic is about the management of human resource in a efficient way for the betterment of an organization and how it can be used to stabilize and economically power the employee as well as the organization.
Definition of HRM
Human resource management is to make the most productive
use of human resource to the greatest benefits of the
organization and individuals.
Organization: profits and social commitments.
Individuals: development and achievement.
Definition By Pettigrew & Whipp
“Human resource management relates to the total set of knowledge,
skills and attitudes that firms need to compete. It involves concern
for and action in the management of people, including: selection,
training and development, employee relations and compensation.
Such actions may be bound together by the action of an HRM
2. Operative functions
The operative functions are those tasks or duties which are
specifically entrusted to the HR.
Employment of proper kind and number of persons necessary to
achieve the objectives of the organization.
Training and development of personnel is a follow up of the
This function is concerned with the determination of adequate
and equitable remuneration of the employees in the organization of
their contribution to the organizational goals
d) Maintenance (Working Conditions and Welfare)
Provide good working conditions so that employees may like
their work and workplace and maintain their efficiency.
Design a system of financial and non-financial rewards to
motivate the employees.
f) Industrial Relations
The human resource manager can do a great deal in
maintaining industrial peace in the organization as he is deeply
associated with various committees on discipline, labor welfare,
safety, grievance, etc.
The personnel manager has to ensure the release of retirement
benefits to the retiring personnel in time.
3. Advisory functions
Human resource manager is an expert in his area and so can
give advise on matters relating to human resources of the
a) Advised to Top Management
Personnel manager advises the top management in
formulation and evaluation of personnel programs, policies and
b) Advised to Departmental Heads
Personnel manager offers advice to the heads of various
departments on matters such as manpower planning, job analysis
and design, recruitment and selection, placement, training,
performance appraisal, etc.
Definition of Recruitment:
“Recruitment is the process of searching for prospective employees
and stimulating and encouraging them to apply before the job.”
- Flippo EB
“Recruitment acts set of activities and organization uses to attract
job candidates possessing appropriate characteristics to help the
organization reach its objectives.”
- William F Glueck
Recruitment can be defined as:
all activities directed towards locating potential employees
the attraction of applications from suitable applicants.
Recruitment is the process of finding and hiring suitable candidates
to fill the positions. The process involves searching, sourcing and
selecting right candidates for the roles to the organization
The aim of recruitment is to get the best person suited to the job
based on objective criteria for a particular job
Types of Recruitment
Based on the source recruitment is divided into categories:
1. Internal Recruitment: This involves recruiting candidates
within an organization to fill the vacancy.
2. External Recruitment: This involves recruiting a candidate
through references, networks, job portals or they may approach
Internal sources of recruitment are readily available to an
organization. Internal sources are primarily three -
1. Transfers: It implies shifting of an employee from one job to
another without any shift in change of responsibilities.
2. Promotion: It refers to shifting of an employee to a higher
position carrying higher status, responsibilities and pay.
3. Re-employment of ex-employees: It is one of the internal
sources of recruitment in which employees can be invited and
appointed to fill vacancies in the concern. There are situations when
ex-employees provide unsolicited applications also.
Advantages of Internal Recruitment
1. No cost and less time consuming
2. No need of training
3. Builds strong relationship with employees.
4. Motivates others of hard work to get high positions.
5. Easy to pick best talents within an organization very quickly
6. Long stay with the company when promoted to high position.
Disadvantages of Internal
1. The positions of the persons who is promoted will be vacant.
2. There may be partiality in promoting employees.
3. No new opportunities for external candidates.
4. Dissatisfied employees may quit if his co-worker is promoted to
5. All vacancies cannot be filled from within organization.
External sources are external to a concern. But it involves lot of time
and money. The external sources of recruitment includes
1. Educational Institutions:
Various companies visit many colleges which have made
arrangements for campus interviews and recruit candidates.
2. Recruiting Agencies:
There are certain professional organizations which look towards
recruitment and employment of people.
3. Employment exchanges:
These exchanges provide information about job vacancies to
jobseekers. These can be private and also government exchanges.
4. Labor Contractors:
These are the specialist people who supply manpower to the
Factory or Manufacturing plants.
Employees recruited through recommendations by trade unions.
6. Gate recruitment:
In this method a notice on the noticeboard of the company
specifying job details of job vacancies can be put. This method is
also called direct recruitment.
It is an external source which has got an important place in
recruitment procedure. Medium used is Newspapers and
Advantages of External
1. Create new opportunities for external employees.
2. Best candidates can be placed for the roles
3. Cost of employees can be minimized.
4. Increase in the selection ratio.
5. There are less chances of partiality.
6. Uniqueness in employees worked for different companies can
take the current company to extra mile.
7. Able to recruit the skills it needs.
Disadvantages Of External
1. Time consuming and expensive.
2. Employees unfamiliar with organization and its orientation.
3. If higher level jobs are filled from external sources,
motivation and loyalty of existing staff effected.
4. Sourcing quality candidates becomes difficult for the
The Process of making a “Hire” or “No Hire” decision
regarding each applicant for a job.
It is the process of choosing qualified individuals who
are available to fill the positions in organization.
The Purpose is to reduce the method of selection as much as
possible, and this means selecting those who will, by and
large ,perform well in the organization and reject who will
FALSE NEGATIVE TRUE POSITIVE
FALSE POSITIVETRUE NEGATIVE
The selection process refers to the steps involved in choosing
people who have the right qualifications to fill a current or future
The selection process consists of five distinct aspects:
1. Criteria development: All individuals involved in the hiring
process should be properly trained on the steps for interviewing,
reviewing resumes and developing interview questions.
2. Application and resume review: People have different
methods of going through this process, but there are also
computer programs that can search for keywords in resumes
and narrow down the number of resumes that must be looked at
3. Interviewing: After the HR manager and/or manager have
determined which applications meet the minimum criteria, he
or she must select those people to be interviewed.
3. Test administration: Any number of tests may be
administered before a hiring decision is made. These include
drug tests, physical tests, personality tests, and cognitive tests.
4. Making the offer: The last step in the selection process is to
offer a position to the chosen
candidate. Compensation and benefits will be defined in an
Tests measure knowledge, skill, and ability, as well as other
characteristics, such as personality traits.
2. Information Gathering
Common methods for gathering information include application
forms and resumes, biographical data, and reference checking.
I. Application Forms and Resumes
Generally ask for information such as address and phone number,
education, work experience, and special training.
II. Biographical Data
Historical events that have shaped a person’s behavior and
III. Reference Checking
Involves contacting an applicant’s previous employers, teachers, or
friends to learn more about the applicant issues with reference
The interview is the most frequently used selection
Interviewing occurs when applicants respond to questions posed
by a manager or some other organizational representative
Typical areas in which questions are posed include education,
experience, knowledge of job procedures, mental ability,
personality, communication ability, social skills.
Some organization in India have recently started visiting
college campuses for recruitment purposes.
Selection teams from different organization, announces jobs,
market there companies – the opportunities, compensation
package, generate the shortlist of application and finally select
the desire number.
Campus Selection procedure includes following steps:
1. Organization’s presentation.
2. Written test /Online test (Aptitude +technical).
3. Group Discussion(Optional).
4. Technical Interviews.
5. HR interviews.
The advantage of this process are most of the applicants are
present at one place and interviews can often be arranged at
Disadvantage of this type of recruitment is that organization
probably have to limit their selection only and “entry”
position. For higher level positions, campus recruitment is
neither feasible nor an attractive proposition.
TYPES OF INTERVIEW
Questions are changed to match the specific applicant.
for example, questions about the candidate’s background in relation
to their resume might be used.
There is a set of standardized questions based on the job
analysis, not on individual candidates’ resumes.
Different Techniques of Interview:
1. Traditional interview
Takes place in the office and consists of the interviewer and the
candidate, and a series of questions are asked and answered.
2. Telephone interview
A telephone interview is often used to narrow the list of people
receiving a traditional interview.
3. Panel interview
A panel interview occurs when several people are interviewing
one candidate at the same time.
4. Information interview
Informational interviews are usually used when there is no
specific job opening, but the candidate is exploring possibilities in
a given career field.
5. Meal interviews
Many organizations offer to take the candidate to lunch or dinner
for the interview. To gather more information about the person, such
as their manners and treatment of wait staff.
6. Group interview
Two or more candidates interview at the same time.
7. Video interviews
Same as traditional interviews, except that video technology is
used. This can be cost saving if one or more of your candidates are
from out of town. For example, Skype.
8. Nondirective interview (Unstructured interview)
In a nondirective interview, some very general questions that are
planned ahead of time may be asked, but the candidate spends
more time talking than the interviewer. It can give candidates a
good chance to show their abilities.
A Wage is a monetary compensation (or remuneration,
personnel expenses, labor) paid by an employer to an
employee in exchange for work done.
Wages are an example of expenses that are involved in
running a business.
An incentive is something that motivates an individual to
perform an action.
Incentives can be classified according to different ways in
which they motivates agents to take a particular course of
A salary is a form of periodic payment from an employer to an
employee which may be specified in a employment contract.
It’s a fixed amount of money or compensation paid to an
employee by an employer in return for work done. Salary is
determined by comparing market pay rates for performing
similar work in similar industries in the same region.
A bonus is an incentive payment that is given to an employee
beyond one's normal standard wage. It is generally given at
the end of the year and does not become part of base pay.
TYPES OF WAGES
Wages have been classified into three categories:
1. Living wages
2. Minimum wages
3. Fair wages
1. Living Wages
The best definition is given by Justice Higgins which reads
"Living wage is a wage sufficient to ensure the workman
food, shelter, clothing, frugal comfort, provision for evil days etc.
as regard for the skill of an artisan, if he is one".
According to Fair Wages Committee Report:
"The living wage should enable the male earner to provide
himself and his family not merely the basic essentials of food,
clothing and shelter but a measure of frugal comfort including
education for the children, protection against ill-health,
requirement of essential social needs and measures of
insurance against old age.“
2. Minimum Wages
“The minimum wage may be defined as the lowest wage necessary
to maintain a worker and his family at the minimum level of
subsistence, which includes food, clothing and shelter. “
Minimum wage in a country is fixed by the government in
consultation with business organizations and trade unions.
3. Fair Wages
Fair wage is a mean between the living wage and the minimum
While the lower limit of the fair wage must obviously be the
minimum wage, the upper limit is the capacity of the industry
to pay fair wage compares reasonably with the average payment
of similar task in other trades or occupations requiring the same
amount of ability.
Fair wage depends on the present economic position as well as
on its future prospects.
Depending Factors of Fair Wages
1. Minimum Wages.
2. Capacity of the industry to pay.
3. Prevailing rates of wages in the same or similar occupations in
the same or neighboring localities.
4. Productivity of labor.
5. Level of national income and its distribution.
6. The place of the industry in the economy of the country.
TYPES OF WAGE PAYMENT
All wage system must satisfy the basic need of the employee
for food, shelter, clothing and reasonable compensation for their
1. Time Based Wage System
2. Piece Base Wage System
All other wage systems are combination of these two methods
of wage system.
1. Time Wage System
Wages are calculated in the basis of time worked irrespective
of the quality of work done.
Thus the wages are calculated by multiplying the time spent
by predetermined rate of wages.
Wage = Time spent * Rate per unit of time
= T * R
where T = Time spent in hours
R = Rate per hour
Advantages of Time Wage system
Simple system and economical.
It gives workers a sense of security as they know that they will
be compensated for time spent within the organization
irrespective of efficiency.
Minimize material wastages as the work is not done in hurry.
This system works best on artistic jobs where quality of output
is of prime consideration.
Workers can easily understand the calculation of their wages.
Disadvantages of Time wage system
It requires continuous supervision.
As the workers are not in hurry to work, production can suffer.
Under this process the workers generally adopt the policy of go
This system has no positive inducement for workers so that
they could enhance their efficiency.
The system doesn’t differentiate between efficient and
inefficient workers. As wages are paid in terms of time spent, it
decrease the morale of efficient ones.
2. Piece Rate System
Under this system, the wages are paid to a worker on the
basis of output produced by him without considering the time
taken in performing the work.
Wages = N * R
where N = no. of unit produced.
R = Rate per unit
The earning of workers depends on the speed of the work and
his own individual skills and efficiency.
Advantages of Piece Rate System
Works as an inducer for workers to produce more.
Here reward is related to efforts.
This method is fair to all as inefficient workers are panelized
and efficient worker are rewarded.
Disadvantages of Piece Rate System
In an effort to produce more and earn more workers may
exert themselves to fatigue.
Workers feels insecure in this system because they will lose
wages for the period of absence.
This system requires an up-to-date records of output produce
by each workers which increase the clerical works.
1. Individual Incentive Wage Plans
Also known as Personnel Incentive Wage Plans.
These plans motivate the individuals to produce more. Such plans
may be based on time or production.
1.1. Time Based Individual
Incentive Wage Plans
a) The Halsey Premium Plan
A mechanical engineer F.A. Halsey devised this plan.
It is a simple combination of the time - speed basis of payment.
The worker gets his wages for the time he works.
For the calculation of premium, a standard time is fixed for each
job on the basis of past performances. If the worker finishes the
job before this standard fixed time, he gets bonus for the time
saved by him.
Rate of bonus is 30% to 50% of the wage payable for the time saved.
Suppose a worker gets his wages @ Rs 60 per hour.
He finishes his work in 15 hours for standard time fixed is 20 hours.
Thus he saves 5 hours. He will get a total wage of Rs. 1050.
Wage for 15 hours @ Rs 60 i.e. = 15 * 60 = Rs 900
Wages for 5 hours (the time saved) @ 50% of the usual hourly rate =
(5 * 60 * 50 ) / 100 = Rs 150
So, total earning for him = Rs 900 + Rs 150 = Rs 1050
He will get Rs. 1050 and will also earn something more by utilizing the
time saved i.e., 5 hours.
b) The Rowan Premium Plan
It was introduced by James Rowan of David Rowan & Sons,
Glassgow in 1901.
It is modification in the Halsey's Plan.
The premium is calculated on a percentage of wages for the
time worked and not for the time saved.
This gives more bonus to the workers.
It is calculated by the following formula:
Total Wage = Time Taken × Time Rate + Time Saved /
Standard Time × Time Taken × Time Rate
Total Wage = ( 15 × 60 ) + ( ( 5 / 20) × 15 × 60) = 900 + (0.25 × 15
× 60 ) = 900 + 225
= Rs. 1125
Thus, if the worker finishes the job in 15 hours for standard time
of 20 hours and the hourly rate of wage is Rs. 60 , a worker will
get a total of Rs. 1125 .
c) Emerson's Efficiency Bonus Plan
This plan has been introduced by Harrington Emerson.
Under this plan every worker is guaranteed his day wages
irrespective of his performance.
A standard output is fixed, and is represents 100% efficiency.
According to the plan up to 66 2/3 % the guaranteed time wages are
paid to the workers, after this they are paid bonus at stated ratio of
the time wages.
Emerson used 32 empirical bonus percentages for efficiency beyond
66 2/3% i.e. 67%(approx.) under this plan, the bonus starts from
0.01% above 67% efficiency and increases to 20% at maximum
efficiency. After this point the bonus is 20% above the basic wages
plus 1% for each 1% increase in efficiency.
In a manufacturing concern the daily wages guaranteed for workers
is Rs. 2. The standard output for the
month is 2000 articles representing 100% efficiency. The rate of
wages is paid without bonus to those workers who show up to 66 2/3
Beyond this bonus is payable on a graded scale:
Calculate the total earning of A, B, C, and D who have worked 26
days in a month. A’s output 1000 articles, B’s output 1800 articles,
C’s output 2000 articles and D’s output 2400 articles.
d) The Bedaux Points Premium Plan
Under this plan, Standard time is divided into Standard
Each minute of standard time is called Bedaux point or B's.
B's are indicated on each job ticket.
Time wages are paid until 100% efficiency is reached.
Bonus is paid on the basis of number of Beduax Points saved.
Bonus at 75% of wages of Bedaux saved is paid to the worker
and 25% is paid to the foreman.
Thus the standard hour would consist of 60 B’s , or a standard
day of 8 hours ,480 B’s .
Suppose a worker earns 600 B’s in a day ; if the rate per point is
Rs 1 , his total earnings would be :
=(Rs 480 x 1 ) + ( 3 / 4 ) x ( 600 – 480 ) x 1
=Rs 480 + 90
= Rs 570
1.2. Output Based Individual
Incentive Wage Plans
a) Taylor's differential Piece Rate Plan
Under this plan, a standard task is established by the
techniques of time and motion study and two piece rates are
set up for each job.
A high piece rate is allowed to those who can make equal to
higher than the standard performance; and for others who
cannot reach the standard, a lower piece rate exists.
This method penalize the slow and lazy worker and pays
incentive to efficient workers.
A standard output of 200 units is fixed in an 8 hours time. A
rate of 45% is paid if the output is 200 or more units and 35%, if
production is less than 200 units. Worker A has produced 240 units
and B produced 180 units.
The wages to be paid to worker, A will be Rs. 108 i.e. (240 x 0.45)
and that to B will be Rs63 i.e. (180 x 0.35).
2. Merrick's Multiple Piece Rate Plan
It is an improvement over Taylor's Differential Plan.
According to this plan, three piece rates for a job is fixed.
None of these three piece rates are fixed below the normal
These three rates are applied in the manner given below:
Rates Bonus Incentive
1. Up to 83 '/3% Normal Rate
2. Above 83 1/3 % to 100% 110% of Normal Rate
3. Above 110% 120% of Normal Rate
Case 1 -> Output = 80 units
Efficiency = (80 /100 ) x 100 = 80 %
Earnings : As the efficiency is less than 83% ,only the base pie-
rate applies : 80 x 10 = Rs. 800.
Case 2 -> Output = 90 units
Efficiency = (90 / 100 ) x 100 = 90 %
Earnings : As the efficiency is 83 % but less than 100 % , 110 %
the base pie-rate applies :(90 x 110 /100 ) x 10 = Rs. 990.
Case 3 -> Output = 110 units
Efficiency = (110 x 100 / 100 ) = 110 %
Earnings : As the efficiency exceeds 100 % , 120 % of the base
piece – rate applies : 110 x (120 / 100 ) x 10 = Rs 1320 .
c) The Gantt Plan
Introduced by H.L. Gantt
Its an associate of Taylor, devised this scheme on the basis of
Under this scheme, fixed time rates are guaranteed.
Output standards and time standards are established for the
performance of each job.
Workers completing the standard job within the standard
time or a shorter time receive wages for the standard time
plus a bonus.
The bonus is a percentage, varying from 20 to 50, of the
wage for the standard time.
When a worker fails to turn out the required quantity of
products, he simply gets his time rate without any bonus.
2. Group Incentive Wage Plan
Group incentive bonus schemes are introduced where it is difficult to
measure the performance of one worker is affected by the performance
of other workers.
Under this scheme, bonus is made payable to all the workers on a
collective basis. This bonus is promised by management in advance of
the commencement of work for securing in effective teamwork. In all
cases, a fixed standard of performance is established and the bonus is
given for the results shown over the standard performance.
Group incentive wage plan is most suitable in the following cases:
Where it is not possible to measure the performance of each
Where the number of workers making a group is not very large.
Where the workers making a group, possess the same or equal
skills and abilities.
Where the finished product is the result of collective efforts of a
Types of Group Incentive Wage
a) Priestman Plan
Proposed by Priestman's in 1917.
It is applied to workers who work in groups.
It provides for payment of group bonus in addition to the
ordinary time rate to the individual workers.
Thus if during a year, an enterprise is able to reach the
predetermined standard output or exceed the previous year's
output, workers are paid increased wages in the same ratio in
which output has increased.
If in 1990, the output per worker-hour was 10 units and in
1991, it rises to 11 units per worker-hour, the wages in 1991 would
be 10% higher than those in 1990.
Advantage : It brings about team-spirit among the
workers of a group. If the group as a whole works well, this
is bound to add to overall output of the enterprise and in
that case all the workers would stand to benefit.
Disadvantage : It may be insufficient to motivate
individual workers, particularly these who possess greater
skills and experience.
b) Scanlon Plan
This plan is the most popular for shaving the gains from
increase in productivity.
It provides for payment of 10% participating bonus for every
10% increase in productivity.
The benefit is extended to all employees except the members of
Under the plan, workers are not paid the entire amount of
bonus earned by them in any month.
One half of the first 15% of such bonus is set apart for the
creation of a reserve fund.
This fund is used to neutralize the effects of any fluctuations in