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.