Archive for March, 2012

Wage Mechanism for Sustainable Business

Thursday, March 8th, 2012

This is a post by Grad.CMA Vinayak Sahni.

There are many things that have already been discussed in this forum as to what should be included in performance Appraisal report…my aim is to explore new unconventional areas which are overlooked by many stakeholders but still are very vital for sustainable business modal.

I was thinking about unconventional reporting from past few days…I have come out with three areas ….tday My theme is ” wage mechanism for sustainable business”.

wage mechanism for sustainable business

Objective:

Today there are many companies who on their social responsibility front score higher grades by highlighting what they have contributed towards community in which they are operating but there is also a flipside to these overly highlighted gestures by the corporates.

Now , There could be case that organisations are following certain unethical practices that help them to get compensation for the cost incurred on csr.One of such practice could be in form of curtailed labor wages .., As lower labor contributes to largest chunk of working population in India , this practice could be very fruitful. Even by curtailing Rs 10 per labor the Corporate house can be greatly compensated for the cost incurred on social responsibility practices initiated by it .

Objective :

To find out discrepancies in Social responsibility reporting by highlighting hidden unethical practices initiated by corporate to make themselves compensated for the cost incurred on CSR practices , so as to make their financial position even as before.

Benefits:

1) Evaluation of Social responsibilty Practices through effective quantitative terms would show the real stand & cost incurred by organisations on CSR.

2) To show weather the organization is worthy of earning credits on CSR.

3) To change Mindset of Corporate with respect to treatment of lower labor. It attempts to device Industry best practices in managing labor force.

4) Shift of Ideology in setting up Labor wage unrestricted by Minimum wage as set by Govt. & laying down greater emphasis on “Inflation Adjusted Real wages “.

5) To reduce labor unrest & dealing with other labor issues .

Discussion is restricted to following class : Lower Labor & Wage earners , weather permanent or temporary.

During discussion Middle /Lower Management shows permanent staff just above labor.eg Superviser etc

Evidence & checklist:

To gather knowledge on the following…

1) The comparison of wage with minimum wages as per labor law .

What is the percentage of Actual wage with respect to Minimum wage as per Indian Labor Law.

Eg. In India : Labour A earns Rs1000/Month, Min Wage set by Govt. Of India is Rs800/month…

Percentage = Actual wages / Min wage =(1000/800)*100 = 125% , which means in India labor earns 1.25 times more than the min wage set by govt…Now this ratio has to be compared with labor practices across the globe.

2) To check weather the Wage is Inflation Adjusted , Computation of wages In real Value.

Inflation Increased by 10% , but salary remains the same = 1000/Month , so real wage would be Rs909/Month Approx..

3) To check Promotion Benefits given to lower labor & making effective comparison of promotion policies devised for Middle/Lower Management personnels .

Eg.

Middle/lower Management Promotion policy.. Level A to Level B , Duration 3 years , Salary Increased 50%.

Lower Labor Promotion Policy …Level A to Level B, Duration 5 Years & salary Increased 20%.

Promotion policy should be checked in respect to Time , increament & credits earned to get promotion.

4) To check real cost of Social Responsibility .

eg. Organization spends 10cr annually on education for community, Tax benefits it received = 2cr . Labor employed = 5000 workers, Standard Industry salary for similar work 2000/Month , Actually paid by Company Policy = 1000/Month.

Saving per month = (2000-1000)*5000 = 50L . so real cost of CSR would be 10-2-.5=8.5 cr.

5) To check whose the real benefitter of Social practices by Organisation & to check weather the workers who are not receiving benefit are also compensated to make there stand equal to beneficiaries.

eg , suppose the organization has the policy to fund child education of labor employed , & it costs abt 200/child/month for education …Labour A who earns 1000/ month has 2 children so in this case his deemed monthly pay would be 200+200+1000 =1400. Labor B who also earns 1000/month is childless, so consequently his deemed pay would be less , so what is role played by company to satify such labour force who are not at receiving end.

6) What is the daily work policy towards lower labor in comparison to middle level.

Middle/lower Management is entitled to 1 hr lunch break, labor force entitled to 20 mins break.

7) Evaluation of Other facilities like transportation , meals etc. provided to labor force.

8) Comparison of Wages & other policies of daily labor & permanent labor. Whats the policy for those daily wagers who have served the organization for very long & what is the backup provided to them in case there services are terminated by the company ??…

Many Might doubt My intentions to Include this aspect to Performance Appraisal report by saying that it wont be good if we tell the company about its own unethical practices , To answer that Lemme clarify that by study on this aspect in its entirety , we can help the company in devising such policies which would be beneficial for both labor & company in maintaining its Image .Guidance could be given to organisations as to how they can keep their social Responsibility cost at minimum & still achieve greater social goals . Spending more does not always mean greater benefit . There could be a case where the company spends greater than other organisations but still do not achieve desired social goals. It’s aim is to bring about uniformity & evenness in Labor -Organization practices , so as to avoid situations like labor unrest etc , which would further ensure smooth greater productivity.