Monday, February 6, 2012

ERP Functions: Human Resource Management 4

I am really sorry for making all my readers waiting this long. It has been busy days.

Now getting on the track, we were discussing on the pay structure part. We have seen in the last blog the basic pay structure and related terms. Today we shall look into some of the statutory allowances and deductions designed by the Govt. India.

Provident Fund: In short its called as P.F. It is a fixed percentage of amount which is deducted from Gross salary and kept in PF account maintained by Central Government. Currently the fixed percentage is 12% from Employee Gross Salary. Here in addition to this 12% deducted from Employee Gross salary, an equal amount is also has to be paid by the Employer (Company) to the PF account of the employee. So totally it will be 24% of the Gross Salary which is deposited in PF account of the employee. Each company has PF registration number and also each Employee who is eligible for PF will have PF Account number.  Major advantages of PF deduction is it has got 8.5% interest rate calculated monthly. The PF account holder can get loans from their PF accounts after certain period which has to paid in lesser interest rate compare to banks. This will also paid back as pension when a person retires. For more info visit and It is mandatory for organization having more than certain number of employees.

Professional Tax: In short it is called as P.T. This is a fixed amount deducted from Gross salary based on slab defined by the government. However this is not imposed in all the states of India.Business owners, working individuals, merchants and people carrying out various occupations comes under the purview of this tax.  Total tax deducted under this for an employee per year must not be more than 2,400/-. More info and

In further weeks we shall look into Income Tax (TDS), ESI, DA, Minimum Wage act.So that we shall have thorough knowledge of statutory requirements in India. It is obvious that ERP softwares must be adhered to these requirements. So the basic knowledge about these is very much essential.

Monday, October 31, 2011

ERP Functions : Human Resource Management 3

Last time we saw about Organization chart. This time we shall look upon the major part of Human Resource Management i.e. Salary Structure. 

Before going to salary structure we shall look upon the definition of salary. Salary is compensation given to the employee of a company/organization in return to the work he/she has performed. In most cases it will be fixed amount and periodically given to employees. Salary is the earning of the employees. Salary is the value in terms of money for the work done by an employee to the company. This valuation is very much crucial as the satisfaction of the employee is majorly depends on the salary he/she receives. Therefore, structuring the salary is very much essential part of HR Department.

Salary of an employee is derived from various components. There are statutory and organization policies that effects salary of an employee. The components of the salary is divided into three major parts Basic, Allowance, Deduction.

1. Basic Salary :- The constant amount which is defined for an employee. This is the primary amount on which the calculations of Allowances and deductions are made. Usually this is decided based on Employee category and Designation. There are various labor acts that fixes minimum basic amount of a particular type of employee.

2. Allowances :- Additional amount that are given to employee for different benefits. Traveling Allowance (TA), Dearness Allowance(DA), House Rent Allowance (HRA), Medical Allowance (MA) etc are the common allowances provided by the companies. These allowances are based on the basic salary of the employee. It may be in terms of % of basic salary or fixed amount based on basic salary amount slabs. There are some statutory Allowances and usually Govt. fixes the minimum amount to be paid. There can be some specific company defined allowances which are provided based on various parameters. They are usually called as incentives  or perks.

3. Deductions :- Amount that are to be collected from employee's salary for statutory requirements and other future benefits. Professional Tax (PT), Provident Fund (PF), Employee Security Insurance (ESI), Medical Reimbursement, Loans, Insurance Premiums etc are the deductions in the salary structure. Like any other salary component some of these are also governed by Govt. These are to be collected from employee salary very strictly. Like allowance this is also derived from Basic or/and allowances. Other than statutory deductions there be other deductions based on company policies.

Finally the net salary is calculated by following simple firmula

Net Payable Salary = Basic Salary Amount + Total Allowance Amount -  Total Deductions Amount

Total Basic Amount + Allowance Amount is also termed as Gross Salary.

This is about Salary Structure. In the coming blog we shall look on some of statutory allowances and deductions.
Keep watching this space..

Tuesday, October 18, 2011

ERP Functions: Human Resource Management 2

Last week we have started understanding functions of Human Resource. This week we shall continue the same with exploring more on Organizational Chart.

It is obvious that each company has employees who have to play different roles with defined responsibilities. In order to identify these and to make the process of managing employees simpler these are defined as designation inside the company. Each employee of the company, therefore is been identified by not only by name but also by designation. Even though it is completely left to company's management in deciding the designations to be in the company there are certain commonly used designations. Junior Engineer, Senior Engineer, Project Manager, Team Leader, Operation Head, Head Of the Department etc are the some among vast set of designations.

The defining of designation also helps in setting up hierarchy in an organization. Since each designation is defined with its roles & responsibilities it is obvious that an employee having a particular designation do have same roles & responsibilities. Along with that each employee will be reporting to higher designation person, and will also be delegated about his works from him/her. Having all the hierarchy defined for the designations in the company is called Organizational Chart. Here are some of the examples of the Organizational Chart of various types of organizations.
Link1 Link2 Link3 Link4 Link5 Link6

Pay structure, Bonus, Promotion, facilities given to the employees are largely depends on designation of the employee. Designation also tells about experience of a person in an industry. It is to be noted that designations and category of employees are not the same terms. Former is defined based on roles and responsibilities while later for ease of grouping.

This is about Organization chart. Coming blog we shall discuss on Components of Pay Structure.

Keep watching this space..

Sunday, October 9, 2011

ERP Functions - Human Resource Management 1

After long break of festivals lets continue the journey of our understanding of ERP. As stated in previous blog from this week we shall start discussing on Non - Technical or Non - Direct Departments of an Organization.First lets start with Human Resource Management

As the name suggest it deals with information regarding Human Resource of the company. It is eminent that company can neither be run on its own nor by the machines. Human power is needed in order to properly convert resources into saleable products/services. So it is obvious that every company will have human as resources. These human resources are called as Employees of the company.

Even though there will be many employees working in the company, each one will have definite roles and responsibilities with respect to the company's work. So based on this employees will be categorized into different segments under organization. Most of the organization follow hierarchy system, however it is depends on individual organization. General Categories of any typical organization will be Staff, Workers and Trainees. Names are self explanatory. There may be more categories under these basic categories based wage structure, work nature and other internal or statutory requirements.

Human Resource management deals with managing the Employees of the organization. Mainly Recruitment, Salaries, Attendance & Leaves, Statutory or Company provided allowances/deductions, Training, Performance tracking, Bonus, Promotions etc. We shall deal with all these on coming blogs. Keep watching this space.

Friday, September 23, 2011

ERP Functions - Maintenance 3

Last week we studied in detail about three types of maintenance activities. This week we shall see other functions related to maintenance department.

Critical Spares
Warranty, Free Service

We have seen in the last blog that all the types of maintenance activities gets involved with replacement of spares. Some of the times maintenance activity will finish without spares replacement, but in some cases replacement will be necessary. In a industry there will be different kinds of machines, therefore the parts in them will also might not be same. However some spares may also be common across many machines.  Common spares can be purchased and kept in stores as it will be useful for one or other machines. But some of spares will be very much expensive or may also bulk in size, in that case purchasing and storing them will cost more to the company. Some of spares parts will be such that they are not readily available and also if it is not replaced the machine may not run and the machine will be the major machine of production. Such spare parts are categorized as Critical Spares.

Therefore it is necessary to have proper defined spare parts SCM (Supply Chain Management).  Along with that proper stock management of the spares is also required. Especially for critical spares, Min Level, Reorder Level etc are to be defined properly in order to have very less breakdown time of the production. However excessive inventory of expensive item will add to dead money and increases inventory management cost. Therefore maintenance department has to define spares and categorize them also have to define the stock level.

Apart from spare parts management maintenance department also have to maintain the warranty, free service details of machines. This will save the huge amount of expenses to the company.

This completes the functions of Maintenance department. From next week onwards we shall see the Non- Technical functions of Industry. Starting from Human Resource Management.

Keep watching the space.

Friday, September 16, 2011

ERP Functions - Maintenance 2

Last week we have briefly seen about the Plant Maintenance. This week we shall elaborate on each of them and the data collected.

Preventive Maintenance:  It is obvious that, we should do certain tasks and inspection in order to prevent machines from failure. These tasks are to be carried in regular intervals of time, like monthly, weekly, fortnightly etc. The set of tasks or inspection activities are called as check list. the intervals are called as frequency. So preventive maintenance of a machine will have Check List and Frequency defined. Along with that certain spares parts may have to be replaced. Some industries also define the number of man power required and the time required for the completion of activities. With all these the preventive maintenance is carried out and records of carried out preventive maintenance with observation will also be maintained.

Break Down Maintenance: Machines are prone to get failed to perform the desired activity due to various reasons. So when the machine fails or its break down happens the maintenance activities done are called as break down maintenance. Usually the machine operating department will inform to maintenance department about the break down of the machine. Maintenance department will first analysis on immediate cause of nature of breakdown and starts the activities to make the machine running normally. The activities involved will be noted down also any spare part replacements. Once the machine starts running the machine is handed over to the operator. All the timings are noted i.e. Reporting Time, Break Down Activity Time, Handing Over time. If the similar nature of breakdown is repeating then maintenance department will do the root cause analysis. From the root cause analysis certain preventive maintenance activities may be added to prevent the breakdown. 

Predictive Maintenance: This type of maintenance activities are generally carried out in a well established industry with experienced maintenance department staffs. Experienced maintenance engineers can sense the upcoming trouble to the machine by the current performance or noises, vibration etc. Based on these observation they will plan certain maintenance activities to be carried out after certain time or immediately. This is almost similar to preventive maintenance with the difference that it is carried only once and only when sensed. 

Apart from these planned to activities there are many activities which maintenance department will do in their day to day activities. All these are also recorded.

This about the activities of maintenance department. Further we shall see the material procurement for maintenance and types of cost involved with maintenance.

Keep watching

Sunday, September 4, 2011

ERP Functions - Maintenance 1

After long break of one month I am back now to continue our journey on ERP. So far we have gone through Sales, Planning, Supply Chain Management, Production, Quality. Now in this blog we shall move to one more supporting department Maintenance Department.

As the name tells us, Maintenance Department is to maintain the equipment of the factory in running conditions with longer durability period. The proper maintenance of equipments will ensure on time production and on time delivery there by increasing company's business.

There are basically three types of maintenance operations.

1. Preventive Maintenance: Performing activities based on predefined check lists on the equipment. The activities are performed on periodic intervals in order to ensure proper running conditions of the machine.

2. Breakdown Maintenance: This maintenance activity is performed when an equipment has stopped from performing. This is done on need basis.

3. Predictive Maintenance: These activities are done based on pre-assumptions. Usually experts of the equipments will able to grasp the problems that may arrive in future for the machine based on machine behaviors. Then in order to prevent the breakdown because of the problem maintenance activities are done.

These are major types of maintenance. In coming blogs we shall look into each type of maintenance in detail.

Keep watching space