Description

Compensation & Benefits

September 2024 Examination

 

 

Case study.

Aztec Shoe Industries Pvt Ltd is a medium scale shoe factory manufacturing shoes exclusively for the export sector. It has two plants, one in Pune, Maharashtra and the other in Hosur, Tamil Nadu.

The year 2015 was not very good for the company as export orders were scarce and both the plants were operating at much less than full capacity. However, in the beginning of

2016, in March there was good news at last as the company was awarded a big contract to manufacture nearly 5 lakh pairs for a European company and as a result of this order, both the plants started working at full capacity again. However, in July 2016 when only about

50% of the order was executed, disaster struck, as the company received news that the

European client had declared bankruptcy and the order was cancelled.

To overcome the situation, the MD of Aztec, Mr Azad, directed the sales team to procure additional orders on a war footing and also declared that a 20% salary cut will be carried out for all employees (including the MD himself) in the organization for the next three months. He left the implementation of this wage deduction policy, to the General Managers of both the plants.

1. How the Pune Plant handled the Wage deduction Issue

After receiving the wage deduction policy instruction from the MD, the GM of this plant, Mr Murthy invited the General Secretary (GS) of the Union Mr Mehta for a meeting. Then, he appraised Mr. Mehta regarding the situation which had forced the Company

Management to declare a 20% across the board wage-cut for all the employees in the plant. He also requested Mr Mehta to convince the workmen regarding the necessity of this unfortunate action.

Following this meeting, the Union GS, Mr. Mehta addressed all the workmen together and discussed the gist of the conversation that he had with the General Mgr and also conveyed the GM’s request for cooperation from all concerned.

Later, the GM (Mr Murthy), issued a notice addressing the employees which was pasted on the Main Notice Board and on all prominent places inside the plant. This notice was as follows:-

 “It is hereby brought to the notice of all employees that due to the unprecedented financial crisis that our company is facing, the Management is constrained to declare a 20% across the board wage deduction for the next three months. The situation will be reviewed after that period and if the situation improves, later, the deducted money will be returned with interest to everyone.”

A.1) How the Workmen reacted to this Wage-Cut in the Pune Plant

This curt notice pasted on the notice board generated a lot of discussion among the workmen and most were not convinced that the situation was so bad that a 20% wage-cut needed to be imposed and that too at a time when the festival season was approaching. Many also felt that the company may be taking advantage of a bad situation to deny the workmen their dues. However, there were some, very few workmen who appreciated the fact that the management had opted for a general pay-cut and had not resorted to a lay-off.

A.2 Industrial Relation scenario during those three months period

The number of cases of workmen indiscipline was far more during this 3 month period than during the preceding months. Confrontation between the workmen and the management became almost a daily affair, absenteeism was much higher than previous and in general the quality of the production deteriorated. In general, the whole industrial

relation scenario deteriorated and naturally the production of the plant suffered. Apart from these, there were also cases of sabotage and surprisingly cases of pilferage were also much higher during this period than in the preceding months.

1. B) How the Hosur Plant handled the Wage deduction Issue

The General Manager of the Hosur plant (Mr Sukhbir), also invited the General Secretary of the plant and also the most important office bearers for a presentation by his team explaining why this pay-cut was required vis-à-vis the company’s financial position. The basic idea was to convince the Union office bearers that i) this action was unavoidable, given the company’s financial position and ii) this pay-cut was only a temporary affair.

The GM also instructed his Sr Mgrs to interact with the workmen under them and explain the logic behind this unfortunate decision. In this way, the GM ensured that the rank and file understood and was convinced about the necessity of this pay-cut decision.

B.1) How the Workmen reacted to this Wage-Cut in the Pune Plant

Due to methods employed by Mr Sukhbir to explain why this action was necessary, unlike the workmen of the Pune plant, the majority of the workmen were convinced about the veracity of this action. They also felt that they also should cooperate with the management to tide-over this difficult period and so extended their cooperation.

B.2 Industrial Relation scenario during those three months period

Surprisingly, cases of indiscipline actually reduced during the three month’s period. Absenteeism during this period actually improved and the production also improved marginally over the previous periods. Cases of sabotage and theft were non-existent.

Q1)  In the Pune plant, how would you explain the “rampant indiscipline” that occurred in those 3 months and can you link the cases of theft with any theory?     (10 marks)

Ans 1.

Introduction

The tumultuous scenario at Aztec Shoe Industries Pvt Ltd, particularly at the Pune plant, presents a quintessential case of how organizational decisions during crises can profoundly impact employee behavior and overall industrial relations. In 2016, the Pune plant experienced a significant upheaval following the management’s decision to implement a 20% wage deduction across all employees as a response to a canceled order and the ensuing financial strain. This decision came at a time when the employees were gearing up for the festival season, adding to their financial pressures. The response from the workforce—ranging from dissatisfaction to outright indiscipline—provides fertile ground for analyzing the psychological and sociological impacts of sudden organizational changes on employee morale and behavior. This case not only underscores the importance of strategic

 

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Q2)  In your opinion, what factor (or factors) are responsible for the different ways in which the workmen reacted in the two plants.  (10 marks)

Ans 2.

Introduction

The contrasting reactions of workmen at Aztec Shoe Industries Pvt Ltd’s Pune and Hosur plants to the identical challenge of a wage cut elucidate the profound influence of managerial strategy and workplace culture on employee behavior. This divergence offers a fascinating insight into how similar external stressors can lead to vastly different internal dynamics depending on the leadership approach and communication efficacy. The Pune plant faced significant resistance and negative repercussions following the wage cut announcement, including increased indiscipline and theft. Conversely, the Hosur plant experienced a more positive outcome, with improved discipline and cooperation among the

 

 

Case study.

Vasir joined ABC Metaliks Ltd as an “Office Boy” on 1st April 2022 at a monthly consolidated pay of Rs 6000. On 30th September’22, there was a big fire in the office and Vasir showed exemplary courage in dousing the fire and saving company property. However, he was severely burnt and spent three months in the hospital and rejoined duty on 1st of January’23 only.  In acknowledgement of his courage and bravery, the company promoted him to Jr Clerk at a consolidated salary of Rs 8000/month (Minm Wage was Rs 5500 per mth) from 1st Jan’22.

On 31st March’23, the company declared a bonus of 15%; paid Vasir Rs 7500/- as yearly bonus considering the three months hospitalisation as  “unauthorized” leave.

Q3a. What would be the yearly earnings of Vasir for his bonus calculation? (5 marks)

Ans 3a.

Introduction

Calculating the yearly earnings for Vasir at ABC Metaliks Ltd involves considering various elements such as his base salary, the period he was hospitalized, and the promotion he received after showing bravery during the office fire. Understanding the company’s decision to treat his hospitalization period as “unauthorized” leave will also influence the computation of his bonus, raising significant questions about the fairness and legality of such

 

 

Q3b. Is the Rs 7500/- paid to him as his bonus entitlement, correctly paid?   (5 marks)

Ans 3b.

Introduction

The determination of Vasir’s bonus at ABC Metaliks Ltd hinges on the company’s internal policies, applicable labor laws, and the specific circumstances of his employment over the fiscal year. The computation of his bonus, amounting to Rs 7500, needs to be scrutinized under these factors to evaluate its fairness and correctness. Given the change in his salary post-promotion and the consideration of his hospitalization period as “unauthorized” leave,