Project Report

on

“COMPENSATION MANAGEMENT”

Submitted to:<LC head name>

<designation>

Submitted By:

Reg.No-2012-14

CERTIFICA TE

This is hereby certified that Mr <name> is a bona-fide student of <LC name,city>

and has completed his Project,“ STUDY OF COMPENSATION

MANAGEMENT IN HDFC BANK .” during the academic year 2012-2014, at do

Project in HDFC Bank Limited which is a partial requirement for the award of

Master in Business

Administration, under Sikkim Manipal University, Gangtok.

Banglore Signature of the guide

Date:

STUDENT’S DECLARATION

I < > a student of <lc name>

hereby declare that this project report entitled “

STUDY OF COMPENSATION MANAGEMENT IN HDFC BANK ” is a

genuine report carried out by me towards the partial fulfillment of the Master

of Business Administration degree.

Place………… <name>

Date…………. Reg no-

CERTIFICATE OF THE ORGANISATION

TO: WHOMSOEVER IT MAY CONCERN

This is to certify that Mr. <NAME> of MBA (Industry Integrated) course of Sikkim Manipal University at < > Learning Center has Undergone management training at our Organization from 22/04/2014 to till working. His performance during the Training period was good

Authorized Signatory(MURLIDHARA .CHANDRA) HDFC BANK Ltd.

ACKNOWLEDGEMENT

I acknowledge my indebtedness to our <faculty>, <lc name>

, for his guidance & clarifying the doubts in the area of my project study. I am

also thankful to all other faculty members of our college for their kind co-

operation with me for the preparation of the Project in HDFC Bank Limited. I am

thankful to all the respondents who played a major role in completion of this

research work and without their help I could not have completed the project.

Place………… name

Date…………. Reg no-

CONTENTS

Chapter- 1

Objective Limitation Scope Research methodology

Chapter -2

Introduction to compensation management Company Profile

Chapter - 3

Data Analysis & Interpretation

Chapter – 4

Finding conclusion

Chapter – 5

Questionnaires

OBJECTIVE

This project attempts to understand the objectives:-

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.

SC O PE

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.

RESE ARCH D ESI GN

I NTRODUCTI ON

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.

RESE ARC H ME THO DOL O GY

TYPE OF DATA C OLLECTED

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.

PRI MARY SOURC ES

Questionnaire consists of a set of questions presented to respondents. Because ofits 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,

INT ROD UCTI O N OF C OM PE NS ATI ON M ANA G EM ENT

Compensation Management is an integral part of the management of the organization. Compensation is a systematic approach to providing monetaryvalue 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 otherBenefits 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 paymentwhich 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.

Objec tives of Compensation manageme nt ar e:

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.

MOTIVAT

ION

COMPENSATION

PACKAGE

EMPLO

YEE RET

ENTION

NEED SATISFACTION

Co mpo nen ts of C o mpensa tion Sy ste m

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:

JOB A

NALYSIS

SALARYSURVEY

PAYS

TRUCTURES

Types of Compensation Management:- There are two modes of providing compensation to any employee. A) Direct Compensation: All the monetary benefits provided by an organization are considered as direct compensation.B) Indirect Compensation: The non-monetary benefits such as perks, time off, medical benefits are considered as indirect compensation.

SC O PE O F C O M PENSAT I O N M AN A G E M ENT

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.

Dire ct 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 onemonth’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.

Indire ct 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 CompensationInsurance, Unemployment Insurance

Retirement contributions may include: Severance Award, Voluntary orInvoluntary Retirements Benefits such as VRS etc.

Fringe Ben efits or Per ks

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 employeeexchanges (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, hotelsand resorts, and so on).

NON F INANCI AL COM PENSATION

Non-financial compensation is different incentives given to employees that are not in the form of direct pay.

A l ter n a t i v e W o rk S chedu l es - There are many alternatives to a traditional 5 day, 8-hour work schedule.

On-the-J ob Trai ni ng - Showing workers how to perform tasks by observing others.

W o r k / L i fe B a l a nce - When an employer understands the needs employees have to juggle in their lives.

D e v e l o p m ent a l Op p o r t u n i t i es - Training and other opportunities for employees to expand their knowledge and improve their skills.

C as u a l D r e s s - Allowing employees to relax their dress code at work

COMPANY P R OFILE

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 in1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfoliocovers well over a million dwelling units. HDFC has developed significantexpertise 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.

Bus iness Fo cus

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.

Dis tri buti on Netwo rk

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.

C a pital Structure

Share capital of HDFC Bank

As on 31st March, 2009

Rs. 550 crore

Paid-up capital Rs.425,38,41,090/-

Bank's equity 19.38%

ADS Depository 17.70 %

Foreign Institutional Investors(FIIs)

Bank shareholders

27.69 %

5,48,774.

HDFC BANK PRODUCTS

PERSONAL BANKING

Loan Product Deposit Product Investment & Insurance

Auto Loan Loan Against

Security Loan Against

Property Personal loan Credit card 2-wheeler loan Home loans Tractor loan Health Care

Finance Education Loan

Saving a/c Current a/c Fixed deposit Safe Deposit

Lockers

Mutual Fund Bonds Knowledge Centre Insurance General and Health

Insurance

Cards Payment Services Access To Bank

Credit Card Net Safe Net Banking

Debit CardPrepaid Card

MerchantPrepaid Refill

One ViewATM

Bill pay Phone Banking Direct Pay Branch Network Electronic Funds

Transfer Online Payment

of Direct Tax---

---------------------------

Forex Services

------------------------------

Product & Services Trade Services

Forex service

Branch Locater RBI

Guidelines

Data Analysis & Interpretation

1. When was your organization established?

August 1994

2. What types of compensation are available?

Ana ly sis :

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 compensationincludes vacation, leaves, retirement, taxes.

3. Who handle the compensation management department in your organization?

MANAGER

Ana ly sis :

The manager handle the compenstation management department in their

organization.

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%

20%0%

Base Pay

Commissions

80% Travelling/meal/housing allowance

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.

5. What kind of compensation you prefer.

a) Monetary b) Rewarding

c) Motivation d) Holiday packages

0%

67%

33%

0%

Rewarding

Motivation

Holiday

packagesMonetary

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.

6. Are you satisfied with the compensation you receive.

a) Yes b) No

20%

Yes

No

80%

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.

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?

80% 20%

YES NO

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.

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.

9. Is cash still king in employee compensation.

a) Yes b) No

Sales

80% 20%

20% YES

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

10. Is Compensation based more on group performance and less on individual contribution.

a) Yes b) No

10% 90%

90%

YES

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.

11. Is there any procedure of receiving formal feedback by employees on Company policies, compensation, benefits, and employee attitudes.

a) Yes b) No

90%10%

10% YES

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.

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.

13. Are you getting training for improving the performance.

a) Yes b) No c) can’t say

12

10

8

6YES

4NO

2

00 0.5 1 1.5 2 2.5

-2

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.

14. Are you free to give ideas to the higher management.

a) Yes b) No

9876

5YES4

3 NO21

0YES 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.

F I N D I N G S

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.

C ONC LUSI ON

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.

QUEST I ON NAIRE

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

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 onCompany 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