Report on Pragati Life Insurance Limited

INTRODUCTION

Background:

This term project was prepared for fulfilling the requirement of EM-553 Strategic Human Resources Management course. The work started as assigned by the honorable Course Instructor. It took about one month to finish the project.

 Objectives:

The objectives of the term project were:

To understand the strategic planning and implementation process of Performance Appraisal at Pragati Life Insurance Ltd. and matching it with the theoretical concepts of the course

1. To identify the executive level and officer level strategies of Performance Appraisal Pragati Life Insurance Ltd.
2. To identify a problem in performance evaluation system and recommend strategies for the improvement, which will strengthen the company’s overall effectiveness for serving its objectives.

Scope:

The scope of the term project was limited to analyze the performance appraisal system at Pragati Life Insurance Ltd. and recommend restructuring measures for improvement of the system.

Limitation:

The limited time given for the term project was a major limitation. The company set the condition that they would not provide some confidential information. The lower level employees of the company were not available for interviews while doing the research.

Methodology:

Primarily interview of employees of Pragati Life Insurance Limited was conducted to know the system

  Secondary data was analyzed to gain further understanding of the performance appraisal system of Pragati Life Insurance Ltd. Service rule was extensively used through out the term project since it provided both validity and credibility.

 Sources of information:

Sources of primary data: interviews with different Top and Mid level managers at Pragati Life Insurance Ltd.

 Sources of secondary data: service rule and other documents of the organization, industry journals, web sites, etc.

COMPANY PROFILE:

Pragati Life Insurance Limited is a public limited company incorporated with the Registrar of Joint Stock Companies and Firms and registered under Department of Insurance, Ministry of Commerce and Government of the Peoples Republic of Bangladesh to transact life insurance business in Bangladesh. Pragati Life has started its operation in the early 2000.

Pragati Life has successfully completed its six years of business operation and stepped into the 7^th year, but already it is regarded as one of the successful life insurance company in Bangladesh. During this short period, the company has earned a respectable position in the market and has gained firm confidence in the mind of its clients. The success is primarily attributed to prompt and bold decision making, efficient and cordial services, cost containment, effective use of resources and introduction of new diversified products and technologies.

Board of Directors:

The Board of Directors of Pragati Life are comprised of a group of dedicated and renowned business entrepreneurs of the country and have already proven their commitment and services in General Insurance through Pragati Insurance Limited. Now, they are committed to do even better with Life Insurance through Pragati Life Insurance Limited.

Management:

The Management of the company is headed by an Actuary who is a Fellow of the Society of Actuary (FSA) and Member of American Academy of Actuaries (MAAA) and also a host of expert insurance personalities, having long career in insurance both at home and abroad, are working with him. With all these resources in hand, PLIL are able to provide efficient service and tailored made product to meet client’s needs. Company’s attention is always focused on the individual client and his special needs. The Managing Director is also an Ex-officio Member of the Board of Directors and a professional man in insurance and management. He/She has to take the full load of carrying out the guidelines, directions, rules and regulations framed by the Company from time to time and provide all vital information’s to the Board for their knowledge and effective decision. The success of the Board’s decision lies in implementation by the Management and the onus lies on the shoulder of the Managing Director squarely, singularly and individually. He is to be very careful, judicious, honest and sincere and must keep the interest of the company ahead of everything. The Managing Director’s function and responsibility/obligations are enumerated hereunder:

i)       To run and manage the affairs of the company smoothly, efficiently within the frame-work of the rules and regulations of the company and guidelines given by the Board and the Committees and to promote a healthy organizational climate for most effective utilization of the services of the company’s employees in achieving the goal of the company.

ii)      To ensure optimum client’s service and satisfaction through appropriate marketing strategies and expansion.

iii)     To endeavor most in talent hunting to be recruited for various jobs and business of the company through it’s laid down procedure for smooth effective and efficient operation of the company.

iv)     To prepare realistic budget including the fixation of half-yearly and/or yearly business target and also to ensure that such targets are achieved.

v)      To ensure maintenance of proper accounts of every aspect of the company.

vi)     To ensure timely submission of financial, administrative and other information to the regulatory agencies of the Govt.

vii)    To evolve most economic system of managing the company to keep the expenditure of the company under control within budget.

viii)   To develop an efficient and effective system through optimum utilization in available human resources for development of company’s business and speedy and profitable growth of the company itself.

ix)     To ensure the most profitable use of company’s fund through proper and effective investment. To prepare appropriate investment port-folio for the approval of the Committee/Board.

x)      To ensure economic purchase of equipment, furniture, vehicle, stationery, other consumable stores.

xi)     To explore investment opportunities in and outside the country.

xii)    To judiciously and expeditiously settle claims against any risk undertaken by the company.

xiii)   To avoid any and all such business where company may run for unnecessary/undesirable/inevitable risk and claims.

xiv)   To prepare judiciously plan for expansion of company’s business through opening of branches.

xv)    To evaluate the marketing strategies and policies with their effectiveness for achieving the objectives of the company.

xvi)   To ensure that company’s accounts, financial matters etc. are regularly and periodically audited both by the internal and external audit.

xvii)  To prepare report on any other matter relating to finance, accounts, Company’s business as is required statutorily or as is required by the Committee/Board.

Product Line:

PLIL is the only insurance company in Bangladesh, simultaneously marketing four major lines of insurance since inception, namely

1. Individual Product Line-deals with insurance policies of individual persons & their special needs.
2. Pragati Bima Division (Insurance for low income group)-deals with individual policies of low-income group people on monthly premium basis.
3. Group Insurance-deals with insurance coverage for the employees of corporate/institutional lives at a very low cost.
4. Health Insurance-deals with hospitalization insurance coverage of both individual & employees of different organizations.

PLIL has opened a new business wing Islamic Insurance Division in 2005 which is operating on Islamic Rules (Shariah). Under this new division Individual Product Line and Pragati Bima Division is also marketing the products.

Dedication to Service:

PLIL is dedicated to provide innovative products, specially designed to meet your objectives while furnishing you with safety, liquidity and a competitive rate of return currently and in the future. Pragati life and its representatives are not only committed to providing you with quality products, we are here to serve you even after the sale. We are never far away than your telephone.

Philosophy:

PLIL philosophy is best described as maintaining competitiveness balanced with prudent management and fairness to all our policyholders. We believe in adhering to basic principles of insurance and sound financial management while balancing the scales between safety of principle and competitive rate of return to our policyholders.

Objectives:

• To develop a Brand Image as a reliable Bangladeshi Life Insurance Company
• To become Trusted Partner of all Corporate in the Country
• To ensure Prompt and Quality service
• To perform the Social Responsibility for the Rural as well as for Urban People

Highlights of the Company:

• Initiated by leading entrepreneurs of the country
• Only Bangladeshi Company listed in the International Directory
• Products are developed by Company’s own Actuarial Department
• First Bangladeshi Life Insurance Company to launch its own Website
• Reinsured with world’s largest re-insurer – Munich Reinsurance Company, Germany

PERFORMANCE APPRAISAL:

The etymological meaning of the term performance is doing or causing to be done of a thing of part thereof. It refers to the outcome of the behavior of employees. When this term “performance” is applied in case of an employee to appreciate or judge his/her performance then it is known as performance appraisal.

According to Gary Desler, “Performance appraisal may be defined as any procedure that involves—

• Setting work standards;
• Assessing the employees actual performance relative to these standards; and
• Providing feedback to the employee with the aim of motivating that person to eliminate performance deficiencies or to continue to perform above part.”

Performance appraisal encompasses compensation, promotion, transfers, revision, and so on. It is argued by some others that—

 “Performance is what should be emphasized in appraisal because this is what the individual contributes.”

Performance appraisal is a form of control, which is used by corporate to accomplish their pre-determined objectives. Appraisal process provides accurate information; provide necessary incentive to motivate people to work hard to reach the desired objectives.

So performance appraisal is very essential to find out the best performance and also performer and vice-versa. This method is probably the single most effective way to determine the causes of success or failure of an organization. It also helps to assess different programs, selecting different ways of organizing work.

Benefits of performance appraisal:

Performance appraisal is the process of comparing subordinates’ actual performance to the standards that have been set. The main objectives of performance appraisal are as follows:

1. To ensure optimum utilization of allocate resources and also development of human resources.
2. To control employee behavior by using reward, punishment and threat system.
3. To identify clear goals and roles for the employees.
4. To identify and eradicate weakness and to appreciate strong points of the employees.
5. To motivate employees by using reward system.
6. To know where the employees stand vis-à-vis the company and the owner.
7. To gather information on employees to aid decisions on personnel areas like placement, promotion, transfer, training and normal or merit increments etc.
8. To promote interpersonal relation between the employees and supervising officers.
9. To comply with equal employment opportunity regulations.
10. To develop an organizational culture of mutually openness, trust, and mutual respect for achieving organizational goals.

These benefits make performance appraisal system important in business world to find better successes in business life.

ppraisal Process:

Performance appraisal follows a particular structure. This structure exists to facilitate the documentation process that often allows for some sort of quantifiable evaluation. Performance appraisal process involved six steps. These are—

1. Establish performance standard with employees,
2. Mutually set measurable goals,
3. Measure actual performance,
4. Compare actual performance with standards.
5. Discuss the appraisal with the employees,
6. If necessary, initiate corrective action.

These steps are very important to make the appraisal process effective and efficient. These are describe below—

Establish performance standard with employees:

The appraisal process begins with the establishment of performance standards. Performance standard should be established in accordance with the organization strategic goals, and also be clear and objective enough to be understood and measured.

Mutually set measurable goals:

Both employees and employers must be agreed to be specific job performance measures. After establishment of performance standards, it is necessary to communicate the expectation.

Measure actual performance:

The 3^rd step in the appraisal process is the measurement of performance. It is necessary to acquire information to determine actual performance. We should be concerned with how and what we measure. These are four sources of information to measure actual performance. These are—

• Personal observation,
• Statistical reports,
• Written report,
• Oral reports.

Combinations of this information’s increase both the number of input sources and the probability of receiving reliable information.

Compare actual performance with standards:

The 4^th step in the appraisal process is the comparison of actual performance with standards. The point of this step is to note deviation between standard performance and actual performance so that we can proceed to the 5^th step in the process.

Discuss the appraisal with the employee:

In this step, appraiser presents an accurate assessment to the employee. It is very difficult task because the evaluation of one’s ability and contribution has great impact on their self-esteem and performance.

Initiate corrective action:

The final step is the identification of corrective action where necessary. Corrective action can be two types:

• One is immediate and deals predominantly with symptoms. Immediate action corrects something right now and gets things back on track. It is often describe as “putting out fires”.

• Other is basic and delves into causes. Basic corrective action gets to the sources of deviation and seeks to adjust the difference permanently. In some instances, appraiser may rationalize that they do not have the time to take basic corrective action and then take immediate action.

Performance appraisal is an integral part of most organizations. Properly developing and implementing above steps, the performance appraisal process can help an organization achieve its goals.

Who make the appraisal:

            Appraisals are made by superiors, peers, subordinates and self.

 Superior’s appraisal:

Usually, an appraisal is done by the immediate supervisors who are in a position to comment or evaluate the performance of the subordinates. This type of appraisal is done in most of the cases.

Peer’s appraisal:

Peer’s appraisal is generally dependent on the prevailing interpersonal relations in the organization. Here the peers make the appraisals. As argued by Yoder and Staudohar. “Peer’s” may overemphasize the interpersonal aspects of job performance, and their evaluation may be little more than a popularity contents.

 Subordinate’s appraisal:

Appraisal by subordinates may provide useful information about performance of the superiors since the subordinates are observing the day today activities of the superiors.

Self-appraisal:

Self appraisal is another possibility for performance appraisal. Here employees comments on their own performances. Problem with this type of appraisal is that people with high esteem tend to rate them self very high.

Methods of performance appraisal:

Performance appraisal is generally conducted with the aid of a predetermined and formal method. Different methods of performance appraisal are shown below—

1. Graphic Rating Scale Method,
2. Alternation Ranking Method,
3. Paired Comparison Method,
4. Forced Distribution Method,
5. Critical Incident Method,
6. Behaviorally Anchored Rating Scales, and
7. The Management by Objectives Method.

These are described below—

Graphic Rating Scale Method:

The graphic rating scale is the simplest and most popular technique for appraising performance. Graphic rating scale is a scale that lists a number of traits and a range of performance for each. The employee is then rated by identifying the score that best describes his or her level of performance for each trait. The main advantage of this method is it provides a quantitative rating for each employee. On the other side, halo effect, central tendency and also other things make an unclear sense of the result.

Alternation Ranking Method:

Ranking employees from best to worst on a trait or traits is the alternation ranking method. This is easier to distinguish between the worst and best employees that to rank them. The main advantages of this method are it avoids central tendency and other problems that occur in the graphic rating scale. But it has also some limitation. It can cause disagreements among employees and may be unfair if all employees are, in fact, excellent.

Paired Comparison Method:

Paired comparison method refers ranking employees by making a chart of all possible pairs trait and indicating which the better employee of the pair is. The paired comparison method helps make ranking method more precise. For every trait, every subordinate is paired with and compared to every other subordinate.

Forced Distribution Method:

The forced distribution method is similar to grading on a curve. With this method, predetermined percentages of rates are placed in performance categories. For example, one may decide to discuss employees as follows—

          15% high performers,

          20% high-average performers,

          30% average performers,

          20% low-average performers,

          15% low performers.

Critical Incident Method:

This method refers to keep a record of uncommonly good or undesirable examples of an employee’s work-related behavior and reviewing it with the employee at predetermined times. This method can always be used to supplement another appraisal technique and in that role it has several advantages. These are—

• It provides with the specific hard facts for   explaining the appraisal.
• It ensures that the supervisor thinks about the subordinate’s appraisal all during the year because the indicators must be accumulated therefore.
• The rating does not just reflect the employees’ most recent performance.
• Keeping a running list of critical incidents should also provide concrete examples of that specifically the subordinate can do to eliminate any performance deficiencies.

Behaviorally Anchored Rating Scales:

A BARS combines the benefits of narratives critical incidents and quantified ratings by anchoring a quantified scale with specific behavioral examples of good or poor performance. Developing BARS typically requires the following five steps:

• Generate critical incidents: Person who knows the job being appraised is asked to describe specific illustrations of effective and ineffective performance.
• Develop performance dimensions: These people then cluster the incidents into a smaller set of performance dimensions. Each cluster is then defined.
• Reallocate incidents: Another group of people who also know the job then reallocate the original critical incidents. They are given the clusters’ definitions and the critical incidents and area asked to reassign each incident to they think it fits best.
• Scale the incidents: This second group is generally asked to rate the behavior described in the incident as to how effectively or ineffectively it represents performance on the appropriate dimension.
• Develop final instrument: A subset of the incidents is used as behavioral anchors for each dimension.

There are also some advantages of this method. These are—

• It standard is more clear than other method,
• It provides feedback,
• More accurate gauge,
• It is more consistent than others,
• All dimensions are independent.

The Management by Objectives (MBO) Method:

Management by objectives involves setting specific measurable goals with each employee and then periodically reviewing the progress made. The term MBO almost always refers to a comprehensive organizaionwide goal-setting and appraisal program that consists of six main step—

• Set the organization’s goal,
• Set departmental goals,
• Discuss departmental goals,
• Define expected result,
• Performance review,
• Provide feedback.

  Mixing the Methods:

Most firms combine several appraisal techniques. Basically graphic rating scale with descriptive phrases included defining the traits being measured, but there is also a section for comments below each trait. This lets the rater jot down several critical incidents. The quantifiable ranking method permits comparisons of employees and is therefore useful for making salary, transfer and promotion decision. The critical incident provides specific examples of good and poor performance.

REMUNERATION OR COMPENSATION

What is Compensation or Remuneration?

Compensation is the human resource management function that deals with every type of reward individuals receive in exchange for performing organizational task. The basic purpose of compensation management is to establish and maintain an equitable wage and salary structure. It is concerned with the financial aspects of needs, motivation and rewards. Managers, therefore, analyze and interpret the needs of their employees so that rewards can be individually designed to satisfy these needs. Consideration for which labor is exchanged is called compensation. Compensation is what employees receive in exchange for their work. It is a particular kind of price, that is, the price of labor. As any other price, remuneration is set at the point where demand curve for labor crosses the supply curve of labor.

Compensation can be in the form of cash or kind. Compensation may be defined as money received in the performance of works, plus the many kinds of benefits and services that organizations provide their employees. Money is included under direct compensation while benefits come under indirect compensation and may consist of life, accident, health insurance, the employer’s contribution to retirement, pay for vacation, and employer’s required payment for employee welfare as social security.

A wage is compensation. It is the remuneration paid for the service of labor in production, periodically to an employee or worker. Wages form that part of cost of production, which is attributed as compensation paid to labor. Wage usually refers to the hourly rate paid to such groups as production and maintenance employee, who are also called blue-collar workers. On the other hand, salary refers to the weekly and monthly rates paid to clerical administrative and professional employees, managers and supervisors (white-collar workers). Salaries are paid in the form of time rate, mostly on monthly basis.

Wages and salaries are also affected by psychological, sociological and ethical factors. People perceive the level of their wages as a measure of themselves. They may or may not take pride in the amount of their paychecks.  People view wages as a measure of interpersonal status, prestige, and values. Pay differentials serve to depict social hierarchies.

Terms related to Compensation:

Compensation: Compensation may be defined as money received in the performance of works, plus the many kinds of benefits and services that organizations provide their employees. Money is included under direct compensation while benefits come under indirect compensation and may consist of life, accident, health insurance, the employer’s contribution to retirement, pay for vacation, and employer’s required payment for employee welfare as social security.Wages: It is the remuneration paid for the service of labor in production, periodically to an employee or worker. Wages form that part of cost of production, which is attributed as compensation paid to labor.

Salaries: Salary refers to the weekly and monthly rates paid to clerical administrative and professional employees, managers and supervisors (white-collar workers). Salaries are paid in the form of time rate, mostly on monthly basis.

 Fair wage: Employer fixes this. This level of wage varies form industry to industry. The main criteria are the capacity of payment. Fair wage is the wage above the minimum wage but below the living wage.

Living wage: Living wage is one, which should enable the earner to provide for himself and his family not only the bare essentials of food, clothing, and shelter, but also a measure of frugal comfort, including education for his children, protection against ill health, etc.

Nominal wage: Nominal wage is the wage received, which is expressed in terms of money received.

Real wage: This is the wage or earning, which is expressed in terms of goods and services which can be purchased from the money received as wage. This also can be obtained by dividing nominal wages by cost of living index.

Objectives of Compensation Management:

It is a fact that a majority of union-management disputes relate to the question of wage payment. Wages and salaries are often one of the largest components of cost of production and as such have serious implications for growth and profitability of the company.  It is very important because it helps the organization obtain, maintain and retain a productive work force.

Without adequate compensation, current employees are likely to leave. It is the main reason why most individuals seek employment.  From the employee’s point of view, pay is a necessity of life. Pay is the means by which people provide for their own and their families’ needs.

Pay dissatisfaction may cause many problems. This may include: reduce employee productivity, lower performance, decline in the quality of work life, increase grievances, cause workers to search for new jobs, and increase absenteeism and turnover. The management of compensation must meet several objectives. These objectives are listed below:

  Acquire qualified personnel: Compensation needs to be high enough to attract qualified applicants.

   Retain present employees: Compensation levels must be competitive in order to retain qualified employees, otherwise they may quit.

  Ensure equity: The management of wage and salary strives for internal and external equity. Pay must be related to the relative worth of jobs. Internal equity means that similar jobs should get similar pay. External equity involves paying workers at a rate equal to the pay that similar workers receive in another firm.

  Reward desired behavior: Good performance, experience, loyalty, new responsibilities and other behaviors can be rewarded through an effective compensation plan.

  Control costs: Both overpay and underpay are harmful. Effective compensation program help an organization obtain and retain its work force at a reasonable cost.  Pay should not be excessive, considering what the organization can afford to pay.

  Secure. Pay should be enough to help employee feel secure and aid him in satisfying basic needs.

  Acceptable to the employee. The employee should understand the pay system and feel it is a reasonable system for the organization and him or herself.

  Incentive providing. Pay should motivate effective and productive work.

  According to Beach, wage and salary administration  have four major purposes:

• To recruit person for a firm,
• To control pay roll costs,
• To satisfy people, to reduce the incidence of quitting, and grievance, and friction over pay, and
• To motivate people to perform better.

The objectives listed above conflict with one another and a trade off must be made. For example, to retain employees and to ensure equity, wage experts pay similar amount of pay for similar jobs, but a recruiter may want to offer an unusually high amount of salary to attract a qualified recruit. Compensation objectives are not rules; they are guidelines. But the better the objectives are followed, the more the wage and salary management will be. To meet these objectives, compensation specialists evaluate every job, conduct wage and salary surveys, and price each job.

Theories of Wages:

A sound wage policy addresses itself to questions such as adequacy of wages, fairness and equity, hard working conditions and efforts, compensation against inflation, and additional commitment of employees as he grows up to rear family, etc. There are two dimensions- internal and external. Internal dimensions involves capacity to pay, work content and context, wages sufficient to meet basic needs of food, shelter and security and social commitment and like.

External dimensions involve supply and demand in labor market, level o payment prevailing in similar jobs in other organizations. Ethical considerations must prevail on employer and employees as to not to exploit such situation. Theory of wages is a branch of study, which analyze the supply and demand conditions of labor as indicated by Dunlop. The main theories of wages are:

–          Subsistence theory. David Ricardo develops it. It says that workers are paid to enable them to subsist and perpetuate the race without increase or diminution. Low wage lead to decrease of labor due to death and malnutrition, while higher wages increase their number due to better health, long life and more marriage.

–          Wage fund theory. Adam Smith developed it. Wage level is a function of surplus fund available with the employer. Higher the fund, higher the wage. Focus is on employer and his capacity to pay.

–          Surplus value theory. Karl Marx developed it. Here labor is viewed as a commodity for trade. Labor adds value to the product. The employer did not pay the full amount so collected from the customer and instead only a part is paid to them as wage, retaining the remaining by the employer.

–          Residual claimant theory. According to this theory four factors add value to the product, which is manufactured. These are land, labor, capital and entrepreneurship. The revenue earned by selling product was first distributed among the three factors as compensation against their contribution. Whatever remained was paid to labor as wage against their value addition. Thus labor is considered as a residual claimant.

–          Marginal productivity theory. Here demand and supply of labor in the labor market determine wages. Accordingly workers are paid what they are economically worth as assessed by the employer. Marginal concept says that employer continues to employ labor as long as value addition by the marginal worker is more than his cost.

–          Bargaining theory. Here wages level is determined by bargaining power of employers and their association Vs employees and their trade unions.

–          Behavioral theory. Norms, traditions, customs, good will and social pressure influence wage structure. Wages are best motivators of workers. Wage must satisfy a number of needs as identified by Maslow and others like physiological, security, food and shelter, etc.

Determinants of Pay Structure and level:

In the simplest terms, marginal revenue product theory in labor economics holds that the value of a person’s labor is what someone is willing to pay for it. In practice a number of factors interact to determine wage levels. Some of the most influential of these is the following:

Measuring Employee Contribution to the Firm:

Calculating compensation basing on employee’s contribution to the company: It is difficult task to determine what contribution a given employee makes to a product. If contributions cannot be measured directly, are there factors which influence contributions and can they be measured?  Employees’ contribution to a company’s success is dependent upon the following:

  Time spent at work.

  Energy and skill expended-physical, mental, emotional and social.

  Willingness to cooperate.

These can be measured with varying degrees of accuracy. Time, of course, is readily ascertainable. Energy and skill call for judgmental evaluations. People must be compensated for their willingness to work as well as for their time, skill and energy.

 Measuring the foregoing factors in monetary terms: One way is to see what others in the same line of business are paying for such employee contributions. Another is to establish a job evaluation plan by which varying degrees of such factors are given monetary values. Conversions into monetary terms are invariably based on opinions.

Labor market condition:

Where a labor market is tight or loose has a major impact on wage structures and levels. Thus, if the demand for certain skills is high, while the supply is low, there tends to be an increase in the price paid for these skills. Conversely, if the supply of labor is plentiful, relative to the demand for it, wages tend to decrease. For example, the average starting salary of college graduate with bachelor’s degree in computer science was $45000 as against $ 25000 in BBA.

  Legislation:

As in other areas, legislation related to pay plays a vital role in determining internal organization practices. For example, wage-hour laws set limits on minimum wages to be paid and maximum hours to be worked.

Collective bargaining:

Another major influence on wages is collective bargaining. Collective bargaining affects two key factors: the level of wages, and the behavior of workers in relevant labor markets. In addition to wages and benefits, collective bargaining is also used to negotiate procedures for administering pay, procedures for resolving grievances regarding compensation decisions, and methods used to determine the relative worth of jobs.

Administered wages:

Representatives of labor and management in the collective bargaining process set wages. These parties have the power and they exercise it to determine wage rates irrespective of supply and demand factors. It appears that those in positions of power, rather than economic forces, are the real determinants of wage levels. It is also true that parties to administered wages cannot fully ignore economic forces. Both parties must make adjustment of demand and supply of labor when wage rates are administered.

Productivity increases:

Wage rates must be compatible with the overall productivity of the company. It is economically justified only when labor makes a contribution to the productivity increase.

Ability to pay:

Wage increases based on a company’s ability to pay is subject to argument.  All employers, irrespective of their profits or losses, must pay no less than their competitors and need pay no more if they wish to attract and keep workers. For example, if those who are operating unprofitably cut wages because of losses, they would soon find that their workers were leaving them, provided that other jobs were available. An employer’s ability to pay is constrained by its ability to compete. Key factors in the product and service markets are the degree of competition among producers and the level of demand for the products or services. Both of these affect the ability of a firm to change the prices of its products and services. If the employer does pay more, it has two options: to try to pass the increased costs on to consumers or to hold prices fixed and allocate a greater portion of revenues to cover labor costs.

Managerial attitudes:

These factors have a major impact on wage structures and levels. Labor costs need to be reduced in order to compete in the global markets. This is an important principle. Regardless of an organization’s espoused competitive position on wages, its ability to pay ultimately will be a key factor that limits actual wages. This is not to downplay the role of management philosophy and attitudes on pay. On the contrary, management’s desire to maintain or to improve morale, to attract high caliber employees, to reduce turnover, and to improve employees’ standard of living also affect wages, as does the relative importance of a given position to a firm. Wage structures tend to vary across firms to the extent that manager’s view any given position as more or less critical to their firms. Compensation administration will always reflect management judgment to a considerable degree. Ultimately, top management renders judgments regarding the overall competitive pay position of the firm (above- market, at market, or below market rates), factors to be considered in determining job worth and the relative weight to be given seniority and performance in pay decisions. Such judgments are key determinants of the structure and level of wages.

  Cost of living:

Wage increases must be related to the cost of living index. Adjustments in wages need to be made as the index changes. Wages and cost of living move in the same direction; they may go up and down at the same time. It is like a cloud and sailboat moving in the same direction. For example, in the rising phase of a business cycle, all prices tend to rise. Thus the item labor buys go up in price. And wages of labor do, too.  Since cost of living and wages tend to move together, it may be practical to use the former as a measure of the latter.

Equality of workers Theory:

Occasionally the principle is encountered that all workers are economically equal on given types of jobs. An application of this principle is that of paying all workers in a given class of work the same rate, irrespective of individual merit. Trade union supports this principle because it eliminates the troublesome controversies between workers of varying ability as to the rates they should receive.

Power of strikes:

Strike is a potent weapon of union policies. Through it unions control supply of labor as a basic element of wage determination. By withholding supply, the number of people available to work is temporarily reduced to zero. Hence strike or the threat of one is invariably capable of forcing management to accept to some degree the wage demands of unions.

Types of wage plans:

There are two major kinds of wage and salary payment plans. These are time plan and incentive plans. These two types also take many forms.

According to time plan remuneration does not vary with output or quality of output. Instead they are computed in terms of some time unit. The payment is not conditional to the output.  Wages are not linked to productivity. The time unit may be hour, day, week or month.

This system is very popular among white-collar employees. Year-end annual increment, merit increments, bonus and promotion chances are means of motivation in this system.

Time plans are non-incentive in the sense that earnings during a given time period do not vary with the productivity of an employee during the time period.

The second category is composed of incentive plans or those in which remuneration depends on output or some other measure of productivity during a given time period.   To earn more, an employee must expend effort to produce more, to sell more or to reduce cost, or to utilize various resources more effectively, as the case may be.

It is easy to compute and to understand. Most unions also prefer it because the plan does not stimulate speedups or penalize the average worker.  And under it, quality is not sacrificed because it does not stimulate workers to concentrate on production alone. Its main disadvantage is its lack of motivation. Pay is not related to effort or output but merely to the time spent at work. By prolonging the work, the employees can obtain overtime pay.

Time plans may take two forms: day work and measured day work. Day work refers to all time – payment plans used in paying workers, although the hour is the time unit most commonly employed. Wages are computed under it by multiplying the numbers of hours worked by the rate per hour. .

Measured day work overcomes the demerits of day work and gains its advantages. Under this system, employees are paid under the day work system, but hourly rates are revised periodically in accordance with measures of their overall qualifications. The advantage of this plan is that wages may be easily computed; yet employees are provided with a motive for improving their performance. Moreover, earnings are not dependent upon one factor, such as output, but are affected by quality of output, dependability, and versatility.

The major types of incentive plans are piecework, timesaving plan, efficiency bonus plans, and profit sharing plans. Let us now briefly describe each of them.

Piecework:

The most widely used incentive plan is piecework. Under this plan, the number of pieces or units of work that are completed determine wages. Each piece is given a prescribed value, which is known as piece rate. Rates are set by time study and past experience on similar jobs. It is designed to provide workers with an incentive to increase output. Needless to say, they will only succeed in this aim if workers are convinced and motivated by the prospect of increase pay.  It is only appropriate when:

–          The output is standardized,

–          The output is measurable,

–          There is a link between effort and output,

–          Output can be attributed to an individual worker or a group so that each receives a reward commensurate with effort.

Merits:

–          Easy to understand

–          Improve productivity

–          Good incentives for workers to increased their output.

Demerits:

–          Workers focus is on quantity and not quality.

–          Causes high wastage.

–          Greater disparities of earning between slow and fast workers.

–          Worker sinter personal relationship suffers.

–          No guaranteed minimum and this make workers insecure.

–          Workers may suffer from stress and tension.

Time rate:

Less harmful to quality

Less harmful to health of employees

Simple, easy to understand

Does not provide incentive for increased effort.

Required supervision of workforce

Employers vulnerable to work to rule

Sanctions by union

Piece rates:

Stimulates effort

Encourage workers to devise improved methods

Simplifies costing.

Must be adjusted for local circumstances.

Must be adjusted to take account of changes in method.

Encourages workers to cut corners, endangering safety and quality.

  Timesaving plan:

It is one of the oldest incentive plans. Under it, an employee is paid for the time actually spent on a task plus a bonus based on a percentage of the time saved under the time set for the tasks worked on. Under this plan, the following formula is used:

(H x HR) + [(S-H) R] P= W

Thus if a worker whose rate was $5 an hour took 8 hours on a job on which the standard allowance was12 hours, and the percentage was 75, earning would be:

 (8X $5) + [12-8) $5] 75%= $56.

The bonus percentage is usually set between 75% and 100.

Efficiency bonus plan:

An employee is paid for the time actually spent on assigned tasks plus a bonus based on personal efficiency on those tasks. This plan calls for establishing a table of values for increasing degree of efficiency. For each job a standard time allowance is established. At the end of each week, each worker’s efficiency is derived by dividing the time allowed on various jobs by the time taken. To the base wage is then added a percentage for relative efficiency.  For example, a worker who took 40 hours to complete jobs on which the allowance was 36 hours, and whose hourly rate was $ 5, would be paid $115, computed as follows:

(HxR)+ (HXR) selected %= W

(40×5)+ (40x$5) 15%+ $230

Profit-and –revenue sharing plans:

A final group of plans related to compensation is characterized by some form of sharing in profits or revenues the primary objectives of profit sharing plan are to improve productivity, recruit or retain employees, improve product or service quality, and improve employee morale. The plans ` include:

Sharing directly in profits:

As the name suggests, profit sharing involves the employee receiving a share of the company’s profits. Employees receive a bonus that is normally based on some percentage (e.g., 10 to 30 percent) of the company’s profit. The employee’s basic pay is unaffected. Sharing profits with employees has been used as a means of incentive compensation. Firms use it for one or more of the following reasons: to build a group incentive for increased productivity and better employee relations, to institute a flexible reward structure that reflects a company’s actual economic position, to enhance employees’ security and identification with the company, to attract and retain workers more easily, and to educate individuals about the factors that underlie business success.  This plan will not work when there are no profits to divide.

Stock Ownership Plans:

Employee stock ownership plans (ESOPs) have become popular in business firms of USA and Japan (Miller and Christopher, 1987). About 10,000 U.S. firms now share ownership with more than 11 million employees.  The same is pursued by the few Bangladeshi business organizations, (i.e., Beximco Group and Singer Bangladesh Ltd). ESOPs enable employees to become owners or part owners of a company. Managers and workers see themselves as one group and the result is that everyone is highly committed and motivated (Klein, 1988). Employees tend to be most satisfied with stock ownership when the company established its ESOP for employee-centered reasons rather than for strategic reasons.

Generally, ESOPs are established for any of the following reasons:

Almost everyone loves the concept of employee ownership as a kind of people’s capitalism. It brings management and workers as partners.

As a way of borrowing money relatively inexpensively. A firm borrows money from a bank using its stock as collateral, places the stock in an employee stock ownership trust, and as the loan is repaid, distributes the stock at no cost to employees.

  As an additional employee benefit.

  As a part owner, workers have a lot to say about their areas of expertise. They come up with ways to save money and improve productivity. In one survey of over 1100 ESOP companies, about 60% said productivity had increased, and 68% said financial performance was higher since converting to an ESOP (Gates, 1998).

  However, the sharing also can be a disadvantage because employees may feel forced to join, thus placing their financial future a greater risk. Both their wages and financial benefits depend on the performance of the organization. ESOPs are not insured, and if a company goes bankrupt, its stock may be worthless.

Gain Sharing:

It is necessary to have an adequate compensation program, which will attract and retain key people of superior caliber in the organization.  In addition, non-traditional compensation system can be used to motivate employee to improve their performance. Gain sharing, a non traditional system of compensation, in which employees throughout an organization are encouraged to become involved in solving problems and are then given bonuses tied to organisationwide performance improvements (Lawler, 1984). It is the sharing with employers of greater than expected gains in profits or productivity. It is important to distinguish gain sharing from profit sharing. Gain sharing is based on a measure of productivity. Profit sharing is based on profitability measure. Gain sharing, productivity measurement, and bonus payments are frequent events, distributed monthly or quarterly, in contrast to the annual measures and rewards of profit sharing plans.

The same can be applied in the business firms of Bangladesh. The primary objectives of gain sharing plans are to: improve productivity, recruit and retain qualified employees, improve product or service quality, and improve employee morale. Management must be willing to disclose financial and profit information to employees if they want to successfully implement this plan (Masternak, 1997).  Tyler and Fisher (1997) identify the following reasons for failure of gain sharing plan:

  Gain sharing does not work well in piecework operations.

  Some firms are uncomfortable about bringing unions into business planning.

  Some managers may feel they are giving up their prerogatives.

It is true of all incentive plans that, though, that none will work well except in a climate of trustworthy labor-management relations and sound human resources management practices. These issues are discussed next.

Pay for skills:

Skill-based pay is an alternative to job-based pay. Skill-bases pay can be introduced to encourage employee to acquire a variety of skills. Without proper incentive systems, few workers are willing to acquire necessary skills.  Employees will receive a pay increase for each new skill that they master. In such a learning environment, the more workers learn, the more they earn.  Under such a system, workers are paid not on the basis of the job they currently are doing but rather on the basis of the number of jobs they are capable of doing, or on their depth of knowledge. As Peters and Rudolf (1998) points out, “slowly but surely we are becoming a skilled based society where your market value is tied to what you can do and what your skill set is…

In this new world, where skills and knowledge are what really count. It does not make sense to treat people as jobholders. It makes sense to treat them as people with specific skills and to pay them for those skills”.

It is not easy to introduce skilled-based pay system. Part of the problem is that skills are not easy to measure in managerial jobs. Fair assessment and fair compensation, however, are essential to developing workers with a variety of intellectual skills.  It is of much importance to develop and introduce accurate performance appraisal systems. Focus on job-specific, results oriented criteria. Supervisors often resist performance appraisal (Casio, 1996). Few supervisors are trained in the art of giving feedback accurately, comfortably and with a minimum likelihood of creating other problems.  As a result many are afraid to make distinctions among workers- and they do not.

A number of studies have investigated the use and effectiveness of skilled-based pay. Employee with a variety of skills can easily handle any changes as mentioned earlier. Advocates of skill-based pay say that it can reduce staffing requirement, increase flexibility (because a single employee may have the skills to perform a variety of jobs), decrease overall labor cost and increase job satisfaction (Ingram, 1996). Downsizing requires more generalists and fewer specialists. A recent survey of 27 companies with such programs revealed that 70 to 88 percent reported higher job satisfaction, product quality, or productivity. Some 70 to 75 percent reported lower operating costs or reduced turnover (Rowland, 1998). Mastering several jobs will increase understanding and broaden perspectives. It facilitates communication across the organization because people gain a better understanding of other’s jobs. It lessens dysfunctional protection of territory behavior.  Such program also motivates flat-line employees who have little opportunity for promotions.   Multiskilling can be the key to developing a competitive edge and fight global competition.

What about the downside of skilled-based pay?  Skills can become obsolete. When this happens, what should managers do? Cut employee pay or continue to pay for skills that are no longer relevant? There is also the problem created by paying people for acquiring skills for which there may be no immediate need.  Tosi (1998) offers the following suggestions to make skilled-based pay system a success:

  A supportive HRM philosophy underpins all employment activities. Such a philosophy is characterized by mutual trust and the conviction those employees have the ability and motivation to perform well.

  HRM programs such as profit sharing, participative management, empowerment and job enrichment complement the skilled- based pay system.

  Employee exchanges such as assignment and job rotation are common.

  There are opportunities to learn new skills.

  Workers value teamwork and the opportunity to participate. The employees involved develop and implement ideas related to productivity.

Tests of a good Wage Plan:

The apparent purpose of a wage plan is to remunerate employees for the work they perform. This is the one side of story because it gives the impression that output is a function of wages alone. Wage plans do more than this; the nature of the plan itself may or may not appeal to workers. Hence it is important to know what characteristics of wage plans appeal to employees so that they are stimulated to exert greater efforts. The following are desirable qualities in a wage plan:

  Simple and easy to understood.

  Equity and fairness.

  Union management agreement

  Workers must be made to understand these plans.

  It must be acceptable to the employees.

  Easily computed.

  It should be equitable and secure.

  There must be minimum guaranteed payment.

  Time standard must be fixed.

  Complaints and grievance must be properly attended to.

  Earnings related to effort.

 Incentive earnings paid soon after being earned, and

  Relatively stable and unvarying. Do not changes plan frequently?

 Performance appraisal SYSTEM AT PLIL

  Performance Appraisal:

• A Performance Appraisal Committee authorized by the management will analyze & review the employee’s performance for a specified period. The appraisal of all employees of PLIL will be held each year in the month of January.

• A predetermined form with evaluation criteria will be provided to the concerned Head of Department.

• After assessment of his/her performance, the filled in form with recommendation will be placed to the Committee.

• The Committee shall then submit recommendations to the Management for final approval.

Normal Annual Increment:

Normal Annual Increment up to two (2) in the existing scale of the respective employees may be given to the Executives/Officers/Staff by the Managing Director and this will be made as per ACR report submitted by the Unit/Branches Head and on the basis of individual performance. Special increment, beyond two increments may be given by the Appraisal Committee on the recommendation of the Managing Director.

When increment of an employee is ordered to be withheld the authority passing the order shall state the period for which it is to be withheld, and whether the postponement shall have the effect of postponing future increments; and if so, for how long. Where the order fails to specify clearly for what period the officer is to be deprived of his increments, the deprivation shall be held to cease on the expiry of the period during which the officer would have draw the increment initially withheld.

Moreover, unless the order provides otherwise, the officer shall, when the deprivation ceases, be restored in all respects to the same position in the time scale as he would have occupied had the order not been passed.

Confirmation:

Prior to the end of probation period, an assessment will be made about employee’s performance. If it is found satisfactory a letter of confirmation will be issued to him/her. If not, the probation period will be extended further or his/her appointment will be terminated as decided by the Management.

Promotion:     

Promotion cannot be claimed as a matter of right or seniority. Promotion in the Company is based on merit and performance. Generally an employee shall not be considered for promotion until he/she has completed at least two/four years of service in his/her grade. For a junior level officer under section no.3.2.5, the promotion shall not be considered until he/she has completed at least three/four years of service in his/her grade. However, if an employee shows outstanding merit and exceptional abilities and qualities, he/she may be promoted earlier, on ground to be recorded by the management. Generally, a promotion can occur in the following circumstances:

• As a result of re-evaluation of the position, if it is established that a job carries a higher level of responsibility than that pertaining to the grade of the incumbent and the incumbent is discharging the same with a high degree of competence;

• Where a vacancy exists within the Company for which internal candidates are sought from a lower grade.

• When an employee is selected for a higher position on the basis of open competition.

• For non officer level, promotion would be considered after completing three/four years of service in his/her grade.

• For junior level officer, promotion would be considered after completing two/three years of service in his/her grade.

• For mid and senior level officer, promotion would be considered after completing three/four years of service in his/her grade.

Appraisal system followed at PLIL:

Annexure -A

SERVICE BENEFITS:

Salary and other Emoluments:

Executives/Officers/Staffs/Employees in a private sector establishment are generally interested in the total pay and emoluments rather than the basic salary. Keeping that in view, the pay and salary structures have been fairly and equitably fixed. This may, however, be reviewed from time to time with the economic situation in the country and most preferably with the business development and growth of the company.

The Company has defined Pay Scale. Other than the define scale following allowances are also paid to the employees:

  Charge Allowances:  This allowance is given to the employee when an executive or officer is asked to perform the duties of an office in addition to the normal duties.

  Development Allowances:  The staffs who are directly related in the business development of the Company are provided with development allowances for increasing company’s business and portfolio.

  Technical Allowances:  This allowance is paid to the employees who are performing the technical works (i.e. computer programming, Accounting, Investment, Actuarial valuation, Board affairs etc.).

  Cash Allowances:  Employees who deal with cash handling jobs are entitled to receive cash allowance.

 Branch Allowances: The employees who are working in the Service Centers/Zonal Offices/ Area Offices are entitled to receive Branch Allowances according to the rank and position.

  Residence Staff Allowances: Only Senior level officers are entitled to receive the allowance.

Salary of Executive Level:

The Appointment of MD, JMD, DMD, AMD and Company Secretary will be made on contract basis and salary and other emoluments will be provided in the following manner. The Contract based jobs will be entitled to receive the following emoluments per month:

Basic pay, Daily Allowances, Entertainment Allowances, Driver Allowances of Tk………per month, Fuel Cost (C.N.G.) at actual, Residence Telephone and Mobile allowance at actual for MD and JMD and Tk…………per month for DMD, AMD and Company secretary, Residence utility charge at actual for MD and JMD and Tk……….per month for DMD, AMD & Company Secretary, Residence Staff Allowances of Tk………… per month.

Festival Bonus:

Two Festival Bonuses in a year will be entitled for all regular employees:

Amount of Bonus:

One month basic or 60% of the consolidated salary will disbursed to the employee as bonus. Drivers who does not have appointment letter will receive 40% of their respective salary as Festival Bonus.

The Probationary Officer will receive 60% of their monthly consolidated salary as incentive bonus.

If the employee resigns or terminated from the service before 1 (One) year period, or is not retained in the service after probationary period, the entitlement shall be calculated on pro-rata basis, and any excess festival bonus paid shall be recovered from the employees due.

  Eligibility:

Employees who have completed at least of 120 days of service from joining are entitled to receive bonus. Incase of Drivers who does not have appointment letter have to complete at least 1 (One) year of service. Business performance will also be taken into consideration in case of the Drivers of the Development Officers.

Muslim employees will get the festival bonus during two Eids, Hindu and Christian employees will get two festival bonuses during Durgapuja and Christmas day respectively.

Incentive Bonus:

Incentive Bonus shall be entitled in the following manner:

• The employees who are regular, fulltime and confirmed in their post.

• The employees who have completed at least 2 (two) years of services as on 31^st December of that financial year will get such bonus equivalent to 1 (One) month’s basic pay.

• The employees who have completed at least 4 (four) years of services as on 31^st December of that financial year will get such bonus equivalent to 2 (Two) month’s basic pay.

• The employee who have completed at least 6 (six) years of services as on 31^st December of that financial year with good performance will get such bonus equivalent to 3 (Three) month’s basic pay.

• The employee who have completed at least 10 (ten) years of services as on 31^st December of that financial year with good performance will get such bonus equivalent to 4 (four) month’s basic pay.

• Management has the sole discretion to allow or refuse such bonuses entitled to the employee or mentioned in the terms & condition of the employment letter.

Ineligibilities for Incentive Bonus:

• Those who have either been terminated or dismissed from the service of the company for corruption or misconduct or any other irregularities for a specified period.

• Those who have submitted resignation or left the service on their own.

• Those who are accused, reprimanded and charged for financial or any other major irregularities for a specified period.

• Those whose annual review has been held up for any reason for a specified period.

Contributory Provident Fund:

Every confirmed employee is eligible to be a member of Pragati Life Employee Provident Fund. The membership will be effective from the date of confirmation. As a member of the fund, the employee shall contribute 10% of the basic salary each month.

The Company shall similarly contribute an amount in accordance with the following scale. If an employee leave Company’s employment before completion of 5 (five) years service, Company will not contribute any amount to his/her Provident Fund except his/her own contribution with interest thereon. The total amounts so contributed shell be paid by the Company to the employee.

Company’s Contribution will be made in the following way:

• Service with the Company more than five years but up to six years: 3% of the basic salary.
• Service with the Company more than six years but up to seven years: 4% of the basic salary.
• Service with the Company more than seven years but up to eight years: 5% of the basic salary.
• Service with the Company more than eight years but up to nine years: 6% of the basic salary.
• Service with the Company more than nine years but up to ten years: 8% of the basic salary.
• Service with the Company more than ten years: 10% of the basic salary.

Gratuity :

Every permanent employee is entitled to receive gratuity equivalent to two month’s basic pay for each completed year of service up to a maximum 25 (Twenty Five) years after completion of at least 10 (Ten) years of service with the company.

• No employee shall be entitled to gratuity if she/he has not completed at least 10 (Ten) years continuous service with the Company. 

• The last pay drawn by the concerned employee shall be the basis for calculation of the gratuity under this rule.

• Notwithstanding anything contained in this rule :

a)      In the case of employee who dies during service, gratuity may be paid at the discretions of the Board even if the total service of the employee with the Company is less than 10 (Ten) years.

b)      Gratuity will be paid on discharge, resignation or retirement of an employee.

c)      Gratuity shall not be paid to an employee who is dismissed from the service on disciplinary ground.

d)     The amount payable on account of gratuity shall be paid to the employee and, in case of a deceased employee to his/her nominee and, where no nomination has been made to the heirs of the deceased in accordance with law of inheritance, if the employee is a Muslim, and in accordance with religious or other practices, if any incase of others.

Group Term Insurance :

Eligibility:

All the permanent employees of the Company shall be covered under the plan from the date of confirmation.

Coverage:

Death Benefit:

If any employee dies irrespective of the cause of death, the company shall pay to his/her nominee(s) or in absence to his/her legal successor the sum assured.

Accidental Death Benefit:

In case of accidental death, an additional sum equal to death benefit as stated above shall be payable by the company to his/her nominee(s) or in absence to his/her legal successor.

Permanent and Total Disability Benefits:

In case of Total and Permanent Disability resulting from bodily injury directly through accidental means, which prevents the Insured Employee from engaging in any business, occupation or work whatsoever for remuneration or profit and which disability has continued uninterruptedly for a period of at least six months and has been certified to be incurable by a physician approved by the Company, then subject to provisions of the Contract, the Company shall pay to the employee the sum insured stated in the sum assured table and the insurance for the said Employee shall terminate.

In the interpretation of this definition the Company will, however, recognize as Total and Permanent Disability the entire and irrevocable loss of:

i)    Both eyes,

ii)   Both hands above the wrist,

iii)  Both feet above the ankle,

iv)  One hand above the wrist and one foot above the ankle,

v)   One eye and one hand above the wrist,

vi)  One eye and one foot above the ankle.

Should an Insured Employee becoming totally and permanently disabled dies within 365 days from the date of such disablement the Company shall pay his/her nominee(s) the sum insured as stated in the Schedule 5.5.2.9 in respect of the said Employee.

 Permanent Partial Disability Benefits:

In case of a Permanent Partial Disablement caused directly by an accident, indemnity according to the terms and conditions mentioned hereinafter shall be made by the Company to the Employee as specified in the following schedule and where applicable, only one sum namely the larger sum will be paid for multiple injuries resulting from one accident: –

Annexure-B

PPermanent disabilities not mentioned above shall be compensated in accordance with their severity as compared to those listed. Permanent, partial or total loss of the use of a limb shall be deemed to be the same as permanent, partial or total loss of the said limb.

No indemnity is payable for any pre‑existing degree of disablement and if further injury occurs; only the difference between the condition prior to and after current injury shall be considered.

Particulars of employees:

HRD shall submit a list of employees giving Name, Designation, Date of Birth, and Date of confirmation to the Group Insurance Department before commencement of such benefits. Thereafter, whenever there shall be a change in the list of employees i.e., changes due to Change in Designation, Resignation or Joining the company, HRD should intimate to the Group Insurance department within 48 hours of such occurrences. The HRD shall also collect and preserve a Nomination Form in respect of each employee. 

Rate of premium:

The rate of premium for Tk.1, 000/= sum assured per annum would be Tk.6.00 (Taka six) only.

Premium Bill:

On the basis of employees list submitted by the HRD, Group Insurance Department shall submit premium bill to HRD for payment. Pro-rata premium shall be charged for new employees or whose designation has been changed effective from the date of such changes.

Payment of premium:

The Company shall pay the whole premium on behalf of the employees.

Sum Assured:

Sum assured of each employee shall be determined on the basis of his/her present designation as stated in the following table.

The scheme shall be effective from the 1^st day of April 2001.

Hospitalization Insurance:

Eligibility:

All the permanent employees shall be covered under the plan from the date of confirmation.

Particulars of Employees:

HRD shall submit a list and particulars of each employee giving Name, Designation, Date of Birth, and Date of Confirmation along with name, date of birth/age, occupation of spouse, and dependent children to the Group Insurance Department. Thereafter, whenever there shall be a change in the list of employees i.e., changes due to change in Salary, Resigning or Joining the Company, HRD will intimate to the Group Insurance department within 48 hours of such occurrences.

Who are Covered: Employee, Spouse, and Dependent children (Max. two children).

Claim Limit:

Claim limit shall be equivalent to one’s 3 (Three) months basic salary plus Tk. 20,000 per annum.

Benefits:

If any employee or his/her spouse including dependant children as result of injury or illness is confined in a hospital upon recommendation of a Registered physician or surgeon then the Company subject to the provisions and conditions contained herein or which may be endorsed hereon and upon receipt of satisfactory proofs will reimburse the following:

a)      Hospital Daily Room & Board: @ 75% of actual daily room and board charges but not exceeding 2% of Claim Limit per day for the period during which the insured shall actually be an inpatient of the hospital subject further to a maximum of 30(thirty) days for any one confinement. For the purpose of this benefit two or more confinements for the same cause or for any complications arising there from shall be regarded as one confinement if such confinements are not separated by more than 90(ninety) days.

b)     Hospital services: The actual amount but not exceeding customary fee or charge for the following services rendered during any one confinement and which are regular:

1)   Use of operation room and equipment;

2)   Drugs & Medicines;

3)   Dressing, ordinary splints and plaster casts;

4)   Laboratory examinations;

5)   Electrocardiograms;

6)   Basal Metabolism tests;

7)   Physical Therapy;

8)   Anesthesia and Oxygen;

9)   X-ray examinations (Cost of X-ray therapy, Radium therapy, Radium &

      Isotopes are excluded);

10) Intravenous injections & Solutions;

11) Administration of blood and blood plasma is excluded);

12) Ambulance service to and from the hospital.

c)      Surgical Charges: The actual amount but not exceeding the customary fee or charge per surgical operation for any one confinement. Provided that reimbursement of expenses payable according to provisions of the above categories added together shall, in respect of one plan year, not exceed the limit as shown against his/her name in the schedule of insured(s).

d)     Exclusions: No benefit shall be paid under this scheme for expenses or losses resulting from or incurred in connection with or in consequence of the followings:

• Any congenital infirmity
• Any pre-existing condition
• Any food or food supplements, antiseptics, cosmetic cream etc.
• Any pre-hospitalization expenses
• Mental, emotional or psychiatric disorders, alcoholism or any other narcotic addiction
• Any procedure which is experimental or not generally accepted by the medical profession e.g. acupuncture
• Any cosmetic or plastic treatment/surgery unless required as re-constructive surgery as a consequence of injury due accidents/burns.
• Rest, convalescence or rejuvenation cures, thermal baths or confinement for the purposes of slimming or beautification
• Treatment for family planning purposes including termination of pregnancy, dilatation & curettage or sterility
• Hospitalization as a result of pregnancy or child birth.
• Overseas treatments
• Abortion, miscarriage, entopic pregnancy, fetal death or any complication and/or sequel there from
• Attempted suicide, violation or attempted violation of the law, injuries willfully or intentionally self-inflected or due to insanity or under the influence of a drug
• The examinations, fitting or replacement of eyeglasses including contact lenses or hearing aids
• Health check-ups, radiotherapy, chemotherapy, any form of investigation/ treatment when not incidental or necessary to the treatment of the injury/illness, which caused hospitalization
• Circumcision
• Aids and HIV related diseases
• Any dental treatment

Rate of premium:

The rate of premium shall be 3% of annual basic salary per year.

Payment of premium:

¹/₃^rd (One-Third) of the premium shall be payable by the Employees and shall be deducted from their respective salary and the balance ²/₃^rd (Two-Third) shall be borne by the Company.

Premium Bill:

On the basis of employees list submitted by the HRD, Group Insurance Department shall submit a premium bill to HRD for payment. Pro-rata premium shall be charged for new employees or whose salary has been changed effective from the date of such changes.

Hospitalization and Claim procedure:

Prior to admission in a hospital/clinic the Employee must complete a Staff Hospitalization Form and submit it to HRD along with consulting Doctor’s Advice Note. HRD then forward it to Group Insurance Department. Group Insurance Department will then justify the prayer and issue a Letter of Authorization for Hospitalization or reject the prayer and inform the employee accordingly. In case of emergency, prior authorization is not necessary; however, the concerned employee must notify such occurrence to Group Insurance Department through HRD within 48 hours of such admission.

The Employee shall submit claim through HRD to Group Insurance Department in the prescribed form along with all original-supporting documents for reimbursement of expenses.

  The scheme shall be effective from the 1^st day of October 2000.

Basic Salary Calculation:

All confirmed employee’s basic salary is defined according to the pay structure of the company. In case of consolidated salary, the basic salary would be defined as sixty percent of the consolidated gross salary.

5Transfer Allowance:

All regular employees are entitled to receive cost of travel and daily allowance as per approved mode and rate according to the grade of the post for self and dependent family for each day of journey actually required for joining on transfer that necessitates a change of residence.

Proposed allowances for transfer of personal effects for the Company’s permanent staff working in Head Office/Servicing Cells/Zonal Offices of IPL and Pragati Bima Division:

Traveling Allowances (TA) and Daily Allowances (DA):

Following chart depicts the grades for the employee of PLIL:

The following mode of travel may be approved for Staff working in Central Office, IPL, Pragati Bima Divisions etc. of the Head Office/ Servicing Cells/ Zonal Offices:

Daily Allowance (DA) may be approved as per the following table for the employees and staffs working in Central Office, IPL, Pragati Bima Divisions etc. of the Head Office/ Servicing Cells/ Zonal Offices:

General Rule:

1. Daily and Travel Allowance will be paid for tours outside the duty station only. Each tour must be approved by the concerned authority before commencement of journey.

2. Claims regarding all travel costs must properly be supported by Tickets/Bills/Vouchers as required by this rule.

3. Where Company’s vehicles are used, actual fuel cost with toll charges will be reimbursed.

4. Full DA shall be given for tours of minimum of 24 hours which will be calculated from the starting time up to the time of return to duty station. Lodging allowance will however be paid for overnight stay.

5. 25% Food Allowances will be paid, if the tour is for at least 6 hours, 50% Food Allowance will be paid, if the tour is for 7 – 14 hours; and 75% Food Allowance will be paid if the tour is for more than 14 hours but less than 24 hours.

6. No DA will be paid for tours within 20 KM distance of the duty station, but a meal allowance equivalent to maximum 25% of Food Allowance will be paid.

7. Claims for travel and daily allowance duly authorized by Line Manager/ Head of Department must be submitted to the accounts department along with supporting documents (Tickets/Bills/Vouchers) within 14 days of Travel. Otherwise bill may not qualify for reimbursement. Lodging expense should be supported by Hotel or Rest House Bills (except Grade 20-24). Only 50% of ceiling for Lodging and Food Allowance will be paid when the bills are not submitted. Outside staff should submit the bill to the Head of the Division within 30 days and to the Accounts Department within 45 days of tour.

8. Local conveyance means travel up to a distance of 10 Km (Approx.). Public Transport such as bus/Coach must be used for distance excess of 10 Km. Tickets/Vouchers for local conveyance need not to be submitted, but the Head of the Department must certify the bill. This rule is not applicable for the Grade 01-08.

9. Officers in Grade 01-08 are entitled to Incidental Expense Allowance of Tk.400 (Taka Four Hundred) only for each tour (If the tour is for more than 24 hours).

10. For Overseas tours, TA& DA would be decided by the Managing Director.

11. Incase of Transfer from one district to another district an employee is entitled for TA and a maximum of 2 (Two) days DA.

12. If an employee is transferred at his own request, he/she would not be entitled to any TA/DA and Allowances for transfer of personal effects.

13. An employee is not entitled to receive any TA/DA for any journey involved on taking up/ joining his/her employment with the company.

14. In case of transfer, Transfer Order and Joining Letter must be included with the claim.

15. Under special circumstances MD can vary the above allowances/limitations.

16. In case of attending training, conference or special meetings where allowances are fixed or Food and Lodging are provided by the company, this rule will not be applicable.

17. Any fraud or unfair means adopted in supporting the bills/documents will considered as misconduct, resulting in disciplinary measure and forfeiture of claims.

Proposed allowances for transfer of personal effects for the Company’s permanent staff working in Head Office/Servicing Cells/Zonal Offices of IPL, Pragati Bima Division.

Tour and Travel outside the country:

Chairman, Vice Chairman, Managing Director and other Executives, Officers and Staffs of the company may for official purpose and company’s business undertake foreign tours.  Such tours and travels will be sanctioned in the following manner:

The Board will approve such tours and travels of Chairman, Vice Chairman and Managing Director.

In case of all Executives and Officers Board will approve such tours on recommendation of Managing Director through Administrative Committee.

Vehicle Policy:

To attract and retain capable human resources, it is important to provide a vehicle as part of many compensation packages. A part of this package could be access to a vehicle whenever necessary. However, in order to keep consistency to such packages it is important for the company to have a formal policy. This policy shall be guided by the Board and be the guideline for the management.

For smooth operation and business development of the company, following vehicle policy to be maintained:

Office Staff:

Vehicle shall be purchased for the use of

1. Managing Director            : As decided by the Board from time to time.
2. SVP and above                 : Full time car
3. Department Head             :  Full time car (IPL, PBD, Group, Health etc. related with business development activities).
4. Head Office pool              :  Car/Station-Wagon/Microbus/Jeep for use of day to day office work, field tour for business development, audit, supervision and pickup & dropping of Senior Executives of the company.

Individual Product Line:

Following development officers in the rank of SAVP & above will be preliminarily eligible for car facilities. However this is a privilege not a right.

1. The development officer has to be attached with the company for at least 3 (Three) years before applying for car facility.
2. If the Development officer can achieve minimum first year premium income of Tk. 1,00,00,000/- (Taka One Crore) in the previous business year of requesting the car, the officer will then be applicable for car facility. It should be mentioned that the concerned officer has to earn Tk.60,00,000/= (Taka Sixty Lac) renewal premium or Tk,1,50,00,000/= (Taka One Crore and Fifty Lac) first year premium income in the business year for requesting such facility.
3. The concerned officer who has received the car must ensure that he/she has to earn Tk.1,20,00,000/= (Taka One Crore and Twenty Lac) as first year premium in the next business year after receiving the car or 25% more first year premium than the immediate subordinate who is using car, whichever is higher.
4. The company will provide the servicing expenditure for the car 2 (Two) years from the date of providing the car. Other expenditure regarding car will be maintained as per company rules.
5. Management has the sole discretion to sanction or revert the decision for providing the car to any development officer in any time of the year

The Managing Director will justify maturity, potentiality, punctuality, administrative capacity, financial handling and dues with the company of the eligible development officer before sanction a car to an eligible development officer.

Pragatibima Division:

1. Additional car/jeep will be given to the Development Department of the Pragatibima Division (PBD) under the supervision of the Head of PBD to monitor and expansion of business throughout the country.
2. Development officers in the rank of Zonal Manager will enjoy car facility whose minimum premium income is already Tk. 50,00,000/- a year plus steady monthly premium income of Tk. 5,00,000/- and above.

Access to a Vehicle of Company’s Pool:

   The vehicles of the company’s pool may be requisitioned by any Executive and Officer (who are not entitled full time car) of the company for official use, with a written approval from the Managing Director.

     Members of the Board may not requisition the vehicle, unless there is an emergency need. Such an exception must be approved by the Chairman. In such cases, all expenses shall be borne by the user.

    Anyone using the vehicle must fill out a requisition form at least two days in advance. The Managing Director may approve or refuse such requisition, as he/she considers appropriate.

   The user must sign a register where it will be clearly mentioned the start time (daily) and the end time (daily) of use. This must be reconciled with the vehicle’s logbook to be maintained by the Driver.

 Purchase Policy:

 All purchases must be in the form of a tender or on the basis of minimum 3 (three) quotations collected form the vendors to assess the current market prices.

 The company shall only purchase brand new /reconditioned/used vehicle that provide a minimum of one year warranty on all parts and service.

 All such purchase shall be on lease/cash.

      5.11.6       Revoke Policy of Vehicles:

    If a user is found to undergo disciplinary measures.

    If the car is being misused or abused.

      If unauthorized persons are driving the vehicle.

     If given targets are not achieved.

      If company policies/laws or contracts are breached.

 Upon termination or resignation from the services of the company.

Sale Policy of Vehicles:

 A car can only be sold through a fair auction open to the public.

 The highest bidder shall be awarded the car/vehicle.

 The user however may purchase the vehicle at the market value or at any value set by the Board.

    Upon retirement, a user may continue to use the vehicle up to 6 months. However no costs shall be borne by the company.

  A car can be sold after it has been in use for at least 5 years.

     All vehicles used for more than 8 years should be sold out.

Fuel and Maintenance Policy:

The fuel ceilings are as follows:

1. Managing Director                  at actual
2. JMD/DMD/AMD                   at actual
3. Company Secretary                 at actual
4. SEVP                                      250 liters
5. EVP                                        200 liters
6. SVP                                         180 liters

However, the fuel for the Head of product lines and Development Officers will be fixed by the Managing Director depending on the business performance of the concerned Head of Line and development officer.

Driver Selection Policy:

The driver’s allowance shall be as follows:

1. Driver for Chairman/Vice Chairman/MD/JMD/DMD/AMD/SEVP/EVP/SVP shall be fixed as per pay scale.
2. The user shall appoint his/her own driver
3. The driver must have a valid driving license
4. The driver may not have any criminal records
5. The Company will not appoint or be responsible for the drivers use by the development officers. The company will provide allowance for the driver and shall be fixed by the Managing Director.

Managing Director will follow the above norms and standard in providing transport for smooth operation and business development of the company. However, the Board authorizes the Managing Director to change any of the conditions for the greater interest of the company in consultation with the Chairman of the Board.

Loan Schemes:

PLIL has defined Loans and advance structure for the staffs. So, the company has introduced the following schemes for the employees:

Advance on Basic Salary:

The regular employee of the company can apply for advance equivalent to two (2) basic salaries of his/her pay. The amount of the loan has to be adjusted within three (3) months of the disbursement of the advance.

2. Loan on Provident Fund:

A regular employee can request for loan on the Provident Fund of his/her contribution. The employee who has served the company for at least two (2) continuous years will be eligible for the loan. The maximum loan amount will be 80% of the own contribution of the employee. The loan will be adjustable in maximum 2 (Two) years of time. The interest of the loan will be calculated in the following manner-

• The employee does not have to pay any interest for the loan, but will not get any interest from the Provident Fund after his retirement or resignation for the period in which the loan is taken.  

3. Loan on Other Purpose:

This loan is allowed to a regular employee and the loan can be request for any of the following reasons:-

• Marriage of the employee.
• Study purpose.
• Home Improvements (Furniture / House Renovations.

The interest on the loan will be 12% p.a. and maximum 3(Three) years will be allowed to adjust the loan from the disbursement.

FINDINGS OF THE STUDY:

  Positive findings:

About four-fifths of the executives reported that the performance appraisal system in PLIL serves as a control device, it is a good mechanism to control employee. They opined that it should continue.

The system review helps the supervising officer to have better idea about strength and weakness in his/her department and enables him/her to make more effective work assignments and improved communication between reporting officer and his/her subordinates.

 The appraisal review guides the decision regarding salary increment to a great extent. This encourages employees to show better performance.

 The supervising officer in-charge of appraising his/her subordinates has enough knowledge about his/her subordinate.

 The present ARP system has improved the performance since it was introduced in 2000. some of the improvements are as follows:

• Steady growth of business.
• Manpower is more efficiently utilized.
• Officers are getting more serious about there assigned jobs. They are also serious regarding procurement of business. This particular system helps the employees for getting additional increment or   promotion.
• Control device in the form of performance appraisal has helped in accomplishing its objectives of providing better insurance companying service to the people.

Other findings:

The performance appraisal system now followed is trait based system and thus neglects the reviews on direct job related dimensions.

 PLIL Insurance company service rules provide for periodical appraisal of employees and as such periodical performance Review (PRP) was introduced. This was introduced. This was an open system where employees were able to know their strength and weakness. However, for circumstances beyond control, it is unofficially discontinued in most of the departments.

 Supervising officers are required to rate forms that usually contain traits such as innovative ideas, creative thinking, attitude and loyalty, responsibility etc. which are next to impossible to evaluate objectively and accurately.

 Subjectivity creeps into the appraisal not only because the formats allowed that, but also because of the individual’s value profile.

 In many instances last few months before the appraisal dates are crucial in influencing the assessment of appraisers.

 Repetition of interrelated criteria has made the forms long and complicated.

 The supervising officers are usually reluctant to give negative feedback from the understanding that they have to work with employees next day.

 To get promotion from Grade-2 to Grade-1 officer, the employees have to sit for an examination and as such performance ratings for Grade-2 officer regarding promotion have no value.

 The ARP system focuses mainly on past performance, they look back on what has already happened rather than encourage effective performance in future.

 Finally, the most important finding is that the ARP system is a confidential appraisal process. Therefore, supervising officer do not discuss appraisals with subordinates. They are also not made aware of their strength and weakness. This non-communication keeps the employees in dark about what is expected of them or where they stand.

RECOMMENDATION:

1. The ARP forms which are in use, needs to be revised, to make it simple, and short.

2. At the end of the year during the appraisal period the appraisal process should begin with self-appraisal by every employee. To appraise one’s own self on targets and qualities, the Appraisee would go through a process of reflection. In addition, when one reviews one’s own performance, she/he gets the opportunity to become more aware of her/his own strength and weakness.

3. The present ARP system is a closed system and therefore most employees do not know their strength and weakness. To bring improvements an open system should be introduced and the result of the appraisal, particularly when they are negative should be immediately communicated to the employees, so that, they may try to improve their performance.

4. Performance appraisal should be a continuing process and not once a year ritual.

5. Training programs for appraiser should be undertaken by the HRD & R department, so that the supervising officers develop their appraisal skills and fill up the forms more accurately.

6. It is necessary to rate separately for development purpose from those for reward purpose. If the employees are confidentially rated on few dimensions for administrative decisions, biases are likely to be less participation in a development oriented appraisal system will introduce bilateral communication between the Appraiser and Appraise.

7. An atmosphere of confidence and trust should be developed so that the supervisor and the employee may discuss maters frankly and offer suggestion, which may be beneficial for the organization and the employee. This shall reduce biases.

8. Introducing periodic planning conference (PPC). PPC is a regularly scheduled conference between the supervising officer and his subordinates, generally every year or six months through which the supervisor and subordinates will layout a plan of what the subordinates intend to do during the next six months to improve performance and to develop skills. The supervising officer will also discuss ways, which will aid subordinates in accomplishing his next six months goals. This new approach to performance appraisal may overcome most of the drawbacks and will improve the ARP system of PLIL Insurance Company.

9. The Insurance Company should introduce the standards to assess the performance of an employee, for example, the factors responsible to assess such standard are: relevance, accountability, reliability, validity, fairness and practicality.