2nd Assignment of Compensation Management-- Amjad Baig

COMPENSATION MANAGEMENT(823)

ASSIGNMENT NO. 2

By:Muhammad Amjad Baig

508195520

Submitted to:

Respectable Tutor Mr. Kanwar M. Anwar

H. No.158-B, St No. 94,G-6/1-4, Islamabad.

AIOU, ISLAMABAD

COMPENSATION MANAGEMENT(823)

ASSIGNMENT NO. 2

By:Muhammad Amjad Baig

508195520

Submitted to:

Respectable Tutor Mr. Kanwar M. Anwar

H. No.158-B, St No. 94,G-6/1-4, Islamabad.

AIOU, ISLAMABAD

Assignment No. 2 Project Management (569)

ACKNOWLEDGEMENT

All praise to Almighty Allah, the most merciful and compassionate, who give

me skills and abilities to complete this report successfully

I am grateful to my parents who are always been a source of encouragement for

me throughout my life and from start to the end of this report.

I am greatful to our respectable tutor Mr. Kanwar M. Anwar, for his kind

guidance and support. And also the support & guidance of Mr. Asad Hussain, PA

to SM HR, PTCL, Headquarters, Islamabad for providing me relevant information

to prepare & complete my case study.

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ABSTRACT

Administrative procedure of establishing and supervising wage levels and

operations in an organization. In most organizations, wage and salary

administration is performed in the personnel department, although larger

organizations often have a payroll or wage and salary administration department.

This report is based on the theoretical and practical research on the future of

wage & salary administration function.

This report carries the introduction to Human Resource Managerial Functions,

Compensation Management, Classification Of Wages, Introduction To Wages And

Salary Administration, Factors Influencing Wage And Salary Structure &

Administration Function, Administration Of Wages And Salaries, Principles Of

Wages And Salary Administration & Practical Study Of The Organization. For the

empirical research, I select PTCL and visited PTCL Headquarters, Islamabad.

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CONTENTS TITLE PAGE 1 ACKNOWLEDGEMENT 2 ABSTRACT 3 TABLE OF CONTENTS 4 HUMAN RESOURCE MANAGERIAL FUNCTIONS 5-6 COMPENSATION MANAGEMENT 7 CLASSIFICATION OF WAGES 8 INTRODUCTION TO WAGES AND SALARY ADMINISTRATION 9 FACTORS INFLUENCING WAGE AND SALARY STRUCTURE 10-

13AND ADMINISTRATION FUNCTION

ADMINISTRATION OF WAGES AND SALARIES 13 PRINCIPLES OF WAGES AND SALARY ADMINISTRATION 14-

15 PRACTICAL STUDY OF THE ORGANIZATION INTRODUCTION 16 COMPANY PROFILE 17 VISION 18 MISSION 18 CORE VALUES 18 BOARD OF DIRECTORS 19 MANAGEMENT 20 ORGANIZATIONAL STRUCTURE 21-

23 NUMBER OF EMPLOYEES IN FINANCE SECTION 24 FINANCE & ACCOUNTING SYSTEM OF PTCL 25 ACCOUNTING SYSTEM OF PTCL 26-

27 FINANCE SYSTEM OF PTCL 28-

31 WAGE & SALARY ADMINISTRATION FUNCTION OF PTCL ROLES AND RESPONSIBILITIES 31 REVIEW AND APPROVAL REQUIREMENTS 32

o ONE-LEVEL-UP SUPPORTo WING/DEPARTMENT REVIEW AND SUPPORTo REVIEW AND APPROVAL MODIFIED STAFF WAGE AND SALARY o GUIDELINES

PRINCIPLES 32-34o MINIMUM PAY o ACCOUNTABILITY o PAY PRACTICES o PAY COMPARISONS o FUNDING o ANNUAL PAY INCREASES o PAY FOR TRANSFERS AND REHIRES

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SWOT ANALYSIS 35 CONCLUSION & RECOMMENDATIONS 36

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WAGE & SALARY ADMINISTRATION FUNCTION

HUMAN RESOURCE MANAGERIAL FUNCTIONS

Manager’s primary duty is to mange the people. Like other managers, a human resource manager performs the functions of planning, organizing, directing and controlling. 1) - Planning: A plan is a determination of future action. Establishment of policies and programs, goals are the process of planning. Human resource manager predict the trends in labour market, wages, union demands, etc. and their impact on the co operatives. Planning is the means manage to change. It avoids tomorrow’s crisis. Human resource manager decide the personnel goals, formulating the personnel policies and programs and preparing the human resources budget, etc. 2) - Organizing: Organization is the subsequent activity of the planning. It allocated takes among the members of the group, establishing authority – responsibility relationships among them ant integrating their activities towards common goals. 3) - Directing: Directing is process of motivating, activating, leading and supervising to peoples. Directing includes manager’s influence activity of subordinate’s action. Directing is the centre of the process because it is concerned with initiating action. It helps to sure the willing and effective cooperation of employees for attaining the organization objectives. 4) - Controlling: It is implies checking, verifying and regulating to ensure that everything occurs in conformity with the plan adopted and instructions issued. Such monitoring helps to minimize the gape between desired result and actual performance. Controlling the management of human resource involves auditing training programs, analyzing labour turnover records, directing moral surveys, conducting separation interviews and such other means. Operative Functions: Human resource manager’s tasks are concerned with specific activities of the recruitment and selection training, compensation and maintenance an efficient workforce. 1) - Recruitment and Selection:

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It is concerned with the aim of the selecting right person for the right job. It consists of the following activities.a – Job analysisb – Human resource planningc – Recruitmentd – Selectione – Placementf – Induction and orientation 2) - Training Functions:Human resource manager has to improve the knowledge, skills aptitudes and values of employees so that they can perform the present and future jobs more effectively. It consists of the following activities, a – Performance Appraisalb – Trainingc – Executive Developmentd – Carrier Planning and Development. 3) – Compensation Function:It deals with the equitable and fair remuneration to employees for their contribution to the attainment of organizational objectives. It consists of the following activities,a – Job Evaluationb – Wage and Salary Administrationc – Bonus 4) – Coordinating Functions:It is the process of reconciling the goals of the cooperatives with those of its members. Coordination involves motivating employees through various financial and non-financial incentives, providing job satisfaction, handling employee’s grievances through formal grievance procedures, collective bargaining, and worker’s participation in management, conflict resolution, developing sound relation employee counseling improving quality of work life, etc. 5) – Maintenance Functions: It deals with protecting and promoting the physical and mental health of the employees. For this purpose several types of fringe benefits such as housing, medical aid, educational facilities, conveyance facilities, etc. are provided to employees. Social security measures like provident funds, gratuity, and maternity benefits, injury, disablement allowance, group insurance, etc., are also arranged.

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COMPENSATION MANAGEMENT

Compensation is what employees receive in exchange for their contribution to the organisation.

Total Compensation =

Direct + Indirect Compensation

Base Pay & Incentives Benefits

Wages

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• “Wage means all remuneration, capable of being expressed in terms of money which would if the terms of the contract employment express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment”

– The payment paid for manual and mechanical work is wages– Represents hourly rates of pay

Salary • Meaning Oxford Dictionary - meaning “ Fixed periodical payment to a person

doing other than manual or mechanical work”• It refers to monthly rate of may, irrespective of the number of hours put by an

employee• Compensation to an employee for service rendered on a weekly, monthly or

annual basis.

Incentives • Are paid in addition to wages and salaries. Incentives depend upon

productivity, sales, profit or cost reduction efforts • Individual incentive scheme • Group Incentive Scheme

Fringe benefit• This include such employee benefits as provident fund, gratuity, medical care,

hospitalization, accident relief and group insurance, canteen, uniform recreation

Perquisites • These are allowed to executives and include company car, club membership,

paid holidays, furnished homes, stock option schemes and the like • Perquisites are offered to retain competent executives

Dearness Allowance • Dearness allowance (D.A.) is part of a person's salary. D.A. is calculated as a

percent of the basic salary. This amount is then added to the basic salary along with house rent allowance to get the total salary. Rates vary as per rural/urban areas

Non-Monetary Benefits • This include challenging job responsibilities, recognition of merit, growth

prospects, competent supervision, comfortable working conditions, job sharing and flexi-time

CLASSIFICATION OF WAGES • The International Labour Organization (ILO) in one of its publication, classified

wages as under :

A) Minimum wages

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http://en.wikipedia.org/wiki/Salary


B) Fair Wages C) Living Wages Minimum wages

• It has been defined by the committee as “The wage which must provide not only for the bare sustenance of life, but for the preservation of the efficiency of the worker.

•• The minimum wages must provided for some measure of education medical

requirements and amenities•• It should provide fro the substances of worker’s family members, for the

medical care and for some amenities

Fair Wage • According to committee of Fair Wages : “ It is the wage which is above the

minimum wage but below the living wage”

• The lower limit of fair wage is obviously the minimum wage. The upper limit is set by the “capacity of the industry pay”. Between these two limits, the actual wages should depend on considerations of such factors as

– The productivity of labuor – The prevailing rates of wages in the same or neighboring localities – The level of national income and its distribution – The place of industry in the economy

Living wages • It defined a Living Wage as “One which should enable the earner to provide

for himself and his family not only the bare essential of food, clothing and shelter but a measure of frugal comfort, including education of his children, protection against ill health, requirement of social needs and a measure of insurance against the more important misfortunes including old age”.

INTRODUCTION TO WAGES AND SALARY ADMINISTRATION

• To approve system of job description and evaluation.• Recommend to top management the policy for administration of wage

programme.• To recommend changes in wage policies and in the salary or wage level.• To review wage and salary department wise.• To check all activities of the salary administration against the company

policies.

Job evaluation results in fixing salaries and allowances etc. for the post(s) in an organization. This is not a one-time job. Posts keep on changing according to

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growth and functional transformation of an organization. Simultaneously inflation, devaluation and rising costs are the outside factors, which also force for revision in wages and salaries. Some times, new jobs are added. Old jobs are abolished or modified. All these necessitate the continuing function of wage and salary administration. However, it is mostly handled on centralized levels like Provincial or Federal Ministries of Finance, Public Administration etc.

One of the more complex functions under this element is to authorize ad-hoc or special allowance to persons doing some special work or working under certain circumstances. The main difficulty here is that such allowances should not upset the salary structure or create discontentment among others who handle similar work or works under similar circumstances without the benefit of additional allowances (such as " secretariat allowance" "unattractive area allowance" etc). The Task of personnel management, in this respect, is to compensate the deserving persons without upsetting the prevailing balance in salaries and allowances well in time.

FACTORS INFLUENCING WAGE AND SALARY STRUCTURE AND ADMINISTRATION FUNCTION

The first and the most important problem in wage and salary administration is the establishment of base compensation for the job. This problem is enormously complicated by such factors as Supply and Demand, Labor organization, the firm’s ability to pay, Variations in productivity and Cost of living, Government legislation, Including CIVICS RIGHTS ACT.

In order to attract and retain needed personnel for the organization, employees must perceive that compensation offered is equitable in relation to their inputs and relative contributions. The most likely to be used method to solve this problem at present would be job evaluation, a systematic and orderly process for establishing the worth of job.

The importance of a pay system to an event of major importance to employees and its effects upon them cannot be ignored. It is a valid system if it results in a structure acceptable to both employee and employer. In general, structures that are internally and externally consistent have the greatest chances of affecting overall satisfaction. Under reward, Over-reward and inconsistency of reward not only tend to lead to lower satisfaction but encourage behaviour that often proves dysfunctional to organizational objectives. A sound, systematic, consistent system of compensation determination will do much to promote equity and satisfaction, provided that such a system is understood and accepted by most employees.

Factors influencing wage and salary structure and administrationThe wage policies of different organization vary some what. Marginal units pay the minimum necessary to attract the required number of kind of labour. Often,

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http://hrmba.blogspot.com/2009/10/factors-influencing-wage-and-salary.html

http://hrmba.blogspot.com/2009/10/factors-influencing-wage-and-salary.html


these units pay minimum wage rates required by labour legislation, and recruit marginal labour. At the other extreme, some units pay well about going rates in the labour market. They do so to attract and retain the highest caliber of labour force. Some managers believe in the economy of higher wages. They feel that, by paying high wages, they would attract better workers who will produce more than average worker in the industry. This greater production per employee means greater output per man hour. Hence, labour costs may turn those existing in firms using marginal labour. Some units pay high wages because of a combination of a favourable product market demand, higher ability to pay and the bargaining power of trade union. But a large number of them seek to be competitive in their wage programme, i.e., they aim at paying somewhere near the going rate in the labour they employ. Most units give greater weight to two wage criteria, viz, job requirements and the prevailing rates of wages in the labour market. Other factors, such as changes in the cost of living the supply and demand of labour, and ability to pay are accorded a secondary importance.A sound wage policy is to adopt a job evaluation programme in order to establish fair differentials in wages based upon differences in job contents. Beside the basic factors provided by a job description and job evaluation, those that are usually taken into consideration for wage and salary administration are:

• The organizations ability to pay;• Supply and demand of labour;• The prevailing market rate;• The cost of living;• Living wage;• Productivity;• Trade unions bargaining power;• Job requirements;• Managerial attitudes; and• Psychological and sociological factors.• Levels of skills available in the market.

(1) The organizations ability to pay: Wage increases should be given by those organizations which can afford them. Companies that have good sales and, therefore, high profits tend to pay higher those which running at a loss or earning low profits because of higher cost of production or low sales. In the short run, the economic influence on the ability to pay is practically nil. All employers, irrespective of their profits or losses, must pay no less than their competitors and need to pay no more if they wish to attract and keep workers. In the long run, the ability to pay is important. During the time of prosperity, pay high wages to carry on profitable operations and because of their increased ability to pay. But during the period of depression, wages are cut because the funds are not available. Marginal firms and non profit organization (like hospitals and educational institutions) pay relatively wages because of low or non profits.

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(2) Supply and demand of labour: The labour market conditions or supply and demand forces operate at the national, regional and local levels, and determine organizational wage structure and level.

If the demand for certain skills is high and supply is low, the result is a rise in the price to be paid to these skills. When prolonged and acuter, these labour market pressures probably force most organizations to reclassify hard to fill jobs at a higher level” that suggested by the job evaluation. The other alternative is to pay higher wages if the labour supply is scarce; and lower wages when it is excessive. Similarly, if there is a great demand for labour expertise, wages rise; but if the demand for manpower skill is minimal, the wages will be relatively low. The supply and demand compensation criterion is very closely related to the prevailing pay, comparable wage and on going wage concepts since; in essence, all of these remuneration standards are determined by immediate market forces and factors.

(3) Prevailing market rate: This is known as the ‘comparable wage’ or ‘going wage rate’, and is the widely used criterion. An organization compensation policy generally tends to conform to the wage rate payable by the industry and the community. This is done for several reasons. First, competition demand that competitors adhere to the same relative wage level. Second, various government laws and judicial decisions make the adoption of uniform wage rates an attractive proposition. Third, trade union encourages this practice so that their members can have equal pay, equal work and geographical differences may be eliminated. Fourth, functionally related firms in the same industry requires essentially the same quality of employees, with same skill and experience. This results in a considerable uniformity in wage and salary rates. Finally, if the same or about the same general rates of wages are not paid to the employees as are paid by the organizations competitors, it will not be able to attract and maintain the sufficient quantity and quality of manpower. Some companies pay on a high side of the market in order to obtain goodwill or to insure an adequate supply of labour, while other organizations pay lower wages because economically they have to or because by lowering hiring requirements they can keep jobs adequately manned.

(4) The cost of living: The cost of living pay criterion is usually regarded as an automatic minimum equity pay criterion. This criterion calls for pay adjustments based on increases or decreases in an acceptable cost of living index. In recognition of the influence of the cost of living.” escalator clauses” are written into labour contracts. When the cost of living increases, workers and trade unions demand adjusted wages to offset the erosion of real wages. However, when living costs are stable or decline, the management does not resort to this argument as a reason for wage reductions.

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(5) The living wage: Criterion means that wages paid should be adequate to enable an employee to maintain himself and his family at a reasonable level of existence. However, employers do not generally favor using the concepts of a living wage as a guide to wage determination because they prefer to base the wages of an employee on his contribution rather than on his need. Also, they feel that the level of living prescribed in a workers budge is open to argument since it is based on subjective opinion.

Psychological and Social Factors: These determine in a significant measure how hard a person will work for the compensation received or what pressures he will exert to get his compensation increased. Psychologically, persons perceive the level of wages as a measure of success in life; people may feel secure; have an inferiority complex, seem inadequate or feel the reverse of all these. They may not take pride in their work, or in the wages they get. Therefore, these things should not be overlooked by the management in establishing wage rate. Sociologically and ethically, people feel that “equal work should carry equal wages”that“wages should be commensurate with their efforts,”that“they are not exploited, and that no distinction is made on the basis of caste, colour, sex or religion.” To satisfy the conditions of equity, fairness and justice, a management should take these factors into consideration.

Skill Levels Available in the Market: With the rapid growth of industries business trade, there is shortage of skilled resources. The technological development, automation has been affecting the skill levels at faster rates. Thus the wage levels of skilled employees are constantly changing and an organization has to keep its level up to suit the market needs.

ADMINISTRATION OF WAGES AND SALARIES

Wage and salary administration should be controlled by some proper agency. This responsibility may be entrusted to the personnel department or to some job executive. Since the problem of wages and salary is very delicate and complicated, it is usually entrusted to a Committee composed of high-ranking executives representing major line organizations. The major functions of such Committee are:

a) Approval and/or recommendation to management on job evaluation methods and findings;b) Review and recommendation of basic wage and salary structure;c) Help in the formulation of wage policies from time to time;d) Co-ordination and review of relative departmental rates to ensure conformity; ande) Review of budget estimates for wage and salary adjustments and increases.

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This Committee should be supported by the advice of the technical staff. Such staff committees may be for job evolution. Job description, merit rating, wage and salary surveys in an industry, and for a review of present wage rates procedure and policies.

Alternatively, the over all plan is first prepared by the Personnel Manager in consultation and discussions with senior members of other departments. It is then submitted for final approval of the top executive. Once he has given his approval, for the wage and salary structure and the rules for administration, its implementation becomes a joint effort of all heads of the departments. The actual appraisal of the performance of subordinates is carried out by the various managers, who in turn submit their recommendations to higher authority and the latter, in turn, to the personnel department. The personnel department ordinarily reviews recommendations to ensure compliance with established rules of administration. In unusual cases of serious disagreement, the president makes the final decision.

PRINCIPLES OF WAGES AND SALARY ADMINISTRATION

The generally accepted principles governing the fixation of wages and salary are:

a) There should be definite plan to ensure that differences in pay for jobs are based upon variations in job requirements, such as skill effort, responsibility or job or working conditions and mental and physical requirements.

b) The general level of wages and salaries should be reasonably in line with that prevailing in the labour market. The labour market criterion is most commonly used.

c) The plan should carefully distinguish between jobs and employees. A job carries a certain wage rate, and a person is assigned to fill it that rate. Exceptions sometimes occur in very high level jobs in which the job holder may make the job large or small, depending upon his ability and contributions.

d) Equal pay for equal work, i.e., if two jobs have equal difficulty requirements, the pay should be the same, regardless of who fills them.

e) An equitable practice should be adopted for the recognition of individual differences in ability and contribution. For some units, this may take the from of rate ranges, with in grade increases; in others, it may be a wage incentive plan; in still others, it may take the from of closely integrated sequences of job promotion.

f) There should be a clearly established procedure for hearing and adjusting wage

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complaints. This may be integrated with the regular grievance procedure, if it exists.

g) The employees and the trade union, if there is one, should be informed about the procedure used to establish wage rates. Every employee should be informed of his own position, and of the wage and salary structure. Secrecy in wage matters should not be used as a cover up for haphazard and unreasonable wage programme.

h) The wage should be sufficient to ensure for the worker and his family reasonable standard of living. Workers should receive a guaranteed minimum wage to protect them against conditions beyond their control.

i) The wage and salary structure should be flexible so that changing conditions can be easily met.

j) Prompt and correct payments of the dues of the employees must be ensured and arrears of payment should not accumulate.

k) For revision of wages, a Wage Committee should always be preferred to the individual judgement, however unbiased, or a manager.

l) The wage and salary payment must fulfill a wide variety of human needs, including the need for self-actualisation. It has been recognized that “money is the only form of incentive which is wholly negotiable, appealing to the widest possible range of seekers. Monetary payment often acts as motivation and satisfies interdependently of other job factors.

Desire to maintain or enhance the company’s prestige has been a major factor in the wage policy of a number of firms. Desires to improve or maintain morale, to attract high caliber employees, to reduced turnover, and to provide a high living standard for employees as possible also appear to be factors in management’s wage policy decisions.

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PRACTICAL STUDY OF THE ORGANIZATION(With respect to the issue)

INTRODUCTION

Pakistan Telecommunication Corporation (PTC) has established in December 1990, taking over operations and functions from Pakistan Telephone and Telegraph Department under Pakistan Telecommunication Corporation Act 1991.

This coincided with the Government's competitive policy, encouraging private sector participation and resulting in award of licenses for cellular, card-operated payphones, paging and, lately, data communication services.

In 1994, the PTCL becomes the company limited (Pakistan Telecommunication Company Limited) by issued six million vouchers exchangeable into 600 million shares of the PTCL in two separate placements. Each had a par value of Rs. 10 per share. These vouchers were converted into PTCL shares in mid-1996.

In 1995, Pakistan Telecommunication (Reorganization) Ordinance formed the basis for PTCL monopoly over basic telecommunication sector in the country. It also paved the way for the establishment of an independent regulatory regime. The provisions of the Ordinance were lent permanence in October 1996 through Pakistan Telecommunication (Reorganization) Act.

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The year 2006-07 in the telecom sector was marked by the phenomenal growth in the mobile sector in Pakistan, which doubled its subscriber base to 60 million. The teledensity increased from 26% to 40%, helping to spread the benefits of communication technology across the country. PTCL ’s mobile phone subsidiary Ufone’s subscriber base grew by more than 87%, from 7.49 million to 14 million. The year also witnessed the entry of major telecom companies, most notably China Telecom and Singtel, into market.

The privatization of the company was completed in the FY06, following the purchaser of 26% ‘B’ class ordinary shares by Etisalat International Pakistan L.L.C. EIP took over management control on 12th on April 2006.

In short PTCL has been working vigorously to meet the dual challenge of telecom development and socio-economic uplift of the country. This is characterized by a clearer appreciation of ongoing telecom scenario wherein convergence of technologies continuously changes the shape of the sector.

A measure of this understanding is progressive measures such as establishment of the company's mobile and Internet subsidiaries in 1998. As telecommunication monopolies head towards an imminent end, services and infrastructure providers are set to face even bigger challenges. Pakistan also entered post-monopoly era with deregulation of the telecom sector in January 2003. PTCL is in full awareness of the same, and future policies feature a strong conviction of healthy competition.

COMPANY PROFILE

With employee strength of 30,000 and 5.7 million customers, PTCL is the largest telecommunications provider in Pakistan. PTCL also continues to be the largest CDMA operator in the country with 0.8 million V-fone customers.

The company maintains a leading position in Pakistan as an infrastructure provider to other telecom operators and corporate customers of the country. It has the potential to be an instrumental agent in Pakistan’s economic growth.

PTCL has laid an Optical Fibre Access Network in the major metropolitan centres of Pakistan and local loop services have started to be modernized and upgraded from copper to an optical network.

On the Long Distance and International infrastructure side, the capacity of two SEA-ME-WE submarine cable is being expanded to meet the increasing demand of International traffic.

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Vision

To be the leading Information and Communication Technology Service Provider in the region by achieving customer satisfaction and maximizing shareholders' value'.

The future is unfolding around us. In times to come, we will be the link that allows global communication. We are striving towards mobilizing the world for the future. By becoming partners in innovation, we are ready to shape a future that offers telecom services that bring us closer.

Mission

To achieve our vision by having:

An organizational environment that fosters professionalism, motivation and quality

An environment that is cost effective and quality conscious Services that are based on the most optimum technology "Quality" and "Time" conscious customer service Sustained growth in earnings and profitability

Core Values

Professional Integrity Customer satisfaction Team Work Company Loyalty Corporate Information

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Board of Directors

Mr. Najibullah MalikChairman PTCL BoardSecretary IT & Telecom Division, Ministry of Information TechnologyGovernment of Pakistan, Islamabad

Mr. Abdulrahim Abdulla Abdulrahim Al NooryaniChairman & Chief Executive OfficerEtisalat International Pakistan L.L.C Executive Vice President Contracts & Administration Etisalat, UAE

Mr. Salman SiddiqueSecretary (Finance), Ministry of FinanceGovernment of Pakistan, Islamabad

Mr. Abdulaziz Ahmed Saleh Ahmed Al SawalehChief Human Resources OfficerEtisalat, UAE

Mr. Mushtaq Ahmad BhattiMember TelecomGovernment of Pakistan,Islamabad

Mr. Fadhil Mohamed Erhama Al AnsariExecutive Vice President EngineeringEtisalat, UAE

Mr. Khursheed Ahmed JunejoAmbassador, Embassy of PakistanAbu Dhabi, UAE

Mr. Abdulaziz Hamad Omran TaryamGeneral Manager, Northern EmiratesEtisalat, UAE

Dr. Ahmed Al JarwanGeneral ManagerReal EstateEtisalat, UAE

Ms. Farah Qamar

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Company Secretary PTCLPTCL Headquarters, Islamabad

Management

Walid IrshaidPresident & Chief Executive Officer

Ismail Salih TahaS.E.V.P (HR & Admn)

Muhammad Nehmatullah ToorS.E.V.P (Finance)

M. Mashkoor HussainS.E.V.P (Operations)

Fazal HussainS.E.V.P (Corporate Affairs)

Sikandar NaqiS.E.V.P (Special Projects)

Dr. Sadik Al-JadirS.E.V.P (Commercial)

Shaukat Hayat JavedActing S.E.V.P (Technical)

Farah QamarCompany Secretary

Dr. Sajid QureshiE.V.P (Legal Affairs)

Organizational Structure

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(Source: ptcl website)

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Departments and their Working

The PTCL Organizational structure needs to be formalized on emergent basis.

FINANCE WING STRUCTURE

At this level there is one head SEVP (Finance) who controls the functions of FINANCE, ACCOUNTS, and REVENEU with the assistant of EVP in their respective within the Region, Director Accounts has Senior Revenue Officers in his area of Finance Jurisdiction on Division Level. The Senior Revenue Officer, usually the head of Finance Division and Revenue Officers then supervised on District level.SEVP (Finance)

EVP (Finance), (Accounts) & (Revenue)The Director (Finance),(Accounts) & (Revenue)On the Regional Level comprising two or three Divisions.The Senior Revenue Officers on Division LevelThe Revenue Officers on District Level

In view of the challenging scenario PTCL has to take bold steps regarding its organizational structure in order to demonstrate that PTCL has set-up arms-length relationships among the staff. There should be separation of Finance Wing from the Engineering Wing. Finance Wing should give liberty to take the decision in their favor. Management has to take the strategic decisions, the clear and institutionalized arrangements.

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FINANCE WING STRUCTURE

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SEVP (FINANCE)

EVP (Finance) EVP(Revenue) EVP (Accounts)

GM (Finance) GM (Revenue) GM (Accounts)

Director (Finance)

Director (Revenue)

Director (Accounts)

General Manager of the Region. He will report to the SEVP (OPS) as well as any officer designated by C.E


NUMBER OF EMPLOYEES IN FINANCE SECTION

There are about 15987(2006-2007) employees are working in the PTCL, which are being divided into categorically here under

Division of Employees according to their Status

Regular Daily wager Through T.F Contract *Ad-hoc

12452 1725 956 854 NIL

* There is no any employee in PTCL on Ad-hoc basis. This system of recruitment has since been changed into contract basis.

FINANCE & ACCOUNTING SYSTEM OF PTCL

The PTCL FINANCE & ACCOUNTING system is actually divided into three wings.

1- FINANCE 2- ACCOUNTS 3- REVENUE

1) FINANCEThe SEVP (FINANCE) is concerned with the makeup of the all type of

financial decisions especially in the context of acquisition, financing and management of all assets with some goal in mind. The EVP (Finance) with the General Manager (Finance) extend their expertise in the decision making process.

2) ACCOUNTS

Here the SEVP (Finance) is once again concerned by heading the EVP(ACCOUNTS) and General Manager (Accounts) to deal with all Accounts Decision. In PTCL the Finance and Accounting are so correlated but the difference between finance and Accounting is the method of Funds Recognition and the decision making. In the Accounting the Director Accounts in the PTCL Regions assist the higher management.

3) REVENUE

Here the SEVP (Finance) is once again concerned by heading the EVP (Revenue) and General Manager (Revenue) to deal with all Revenue matters. One Director Revenue within the Region assist to implement and control the inflow of Revenue and Reconcile it with the PTCL Headquarters Islamabad.

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The PTCL is actually the Revenue Generation organization. PTCL Collect the Revenue from the following modes.

1) Revenue from System Billing of Land Line Numbers.a) Through Line Rent of Land Line Numbers.b) Through National wide dialing from LLN’s (Land Line Numbers)c) International dialing from LLN’sd) Providing Value Added services to customers. Like UAN (Universal

Access Numbers), PABX (Private Auto Branch Exchanges),VPN( Virtual Private Network) Bandwidth of ISP’S (Internet service providers)

e) PTCL has its three subsidiaries PAKNET (leading ISP in the country), UFONE (unique cellular phone company in Pakistan), TF (Telecom Foundation) the leading foundation for the welfare of employees of Telecom Sector.

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ACCOUNTING SYSTEM OF PTCL

In PTCL the rules contained in the special volume of the PTCL under which the SEVP (FINANCE) is responsible for creating the procedure of Accounting matters.

CAPITAL RECEIPTS SIDE.

1. REVENUE FROM BILLING SYSTEMa. Revenue from Usual customer.b. Revenue from DXX Systemc. Revenue from DSL Systemd. Revenue from PABX/PBX Systeme. Revenue from Card Phone Operatorsf. Revenue from IPOs Internet service providersg. Revenue from Mobile Phone Operatorsh. Co-location charges from various companies

2. REVENUE FROM OTHERa. Revenue from Overseas calls (Incoming)b. Revenue from Premium PRS (0900) callsc. Income from Dismantle Exchangesd. Revenue from MDF used by other companies

CAPITAL EXPENDITURES

INSTALLATION OF NEW EXCHANGESExpenses of installation of new Exchanges are the major capital expense of

PTCL because PTCL purchases the new telephone exchanges from France, Italy, Germany and China. So heavy cost is to be paid for purchasing process in order to proper margin. Each exchange having different capacity and due which each Engineer should has to be trained accordingly so expenses rises on purchasing of new Telephone Exchanges. This is the main expense of PTCL.

EXTENSION OF EXISTING EXCHANGESThe extension of the existing exchanges is the dire need as the density of

the population is increasing day by day and in order to fulfill the basic communication and fill the communication gap PTCL has to extend its normal Telephone Exchanges in accordance with the demand and per paid connection. So PTCL sustain heavy expenses on the extension of exchanges.

MINOR EXPENDITURES

INTERNAL AUDIT AND TECHNICAL INSPECTIONThe PTCL has sustained huge amount in context of internal audit both Accounts and Technical from various agencies. For example M/s Ferguson conduct both internal audit and external audit and payment made to auditors in the expenses of the company.

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ADMINISTRATION AND CONTROL EXPENSESSome time in the best interest of company, some expenses could be occurred for example if there is need of induction of a financial analyst in one region or if there is need of an Engineer then transfer and posting order can be issued and traveling and training expenses could be realized to employees.

SALARIES OF STAFFThe monthly salary of the staff is rest with the approval of PTCL H.Q Islamabad. PTCL is spending lot of amount on the salaries.

PRINTING AND STATIONARY CHARGESOn printing of stationery PTCL spends reasonable amount.

CONTRIBUTION IN PROVIDEND FUNDThere is also contribution in the provident fund from the PTCL.

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FINANCE SYSTEM OF PTCL

PTCL has magnificent finance structure; it is basically Product Oriented organization so here, the Revenue is the Life Blood as such for any other profit seeking organization. So we should have isolated the Revenue from Finance side or either we should consider the Finance in the context of Revenue.

Finance activities can be evaluated in terms of PTCL’s basic financial statements analyzing through

Finance planning

On PTCL HQ Islamabad, SEVP (Finance) is, who with the concurrence with the CEO for making all the Finance Planning that’s way the PTCL has to inject the money in order to boost up the business and in order to complete the stiff competition faced in the telecomm sector. Before taking any decision regarding financial planning the draft could be presented before the Board of Governors. In this section there is need of financing either in the WLL (wireless local loop) sector or wire-line or mobile operator services.

Managing the PTCL’s Asset structure

PTC is very organized organization and it has also its fixed as well with the current asset. So there are many experts in order to keep the eye watch on the PTCL infrastructure, for example Director (Fixed Assets) is responsible for the maintenance and repair of the building and machinery on the Regional level.

Managing the PTCL’s financial structure

PTCL financial structure is in the safe hands the basic qualification for the post of Assistant Accounts Officer is MBA (Finance) and for the SEVP (Finance) the incumbent should possess the degree of MBA with ACMA & CA. Due to such fresh blood the young and energetic financial management taking some bold decision the results of which are awaited up till.

FUNDING OF PTCL

MOBILIZATION OF FUNDS

PTCL mobilized its funds with following ways.1) Purchase the new imported infrastructure like new Exchanges etc

PTCL mobilized its finds mostly in the purchase of new telephone exchanges from abroad (France, Italy & China). There is also purchase of accessories of telephone exchange generators and other equipments.

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2) Capital expenditure for the organization.There are various expenses for the PTCL in the context of capital expenditure that has already been mentioned in previous pages.

3) Purchase and acquisition of stores.PTCL store items are very important components i.e Stationery, stand-by Exchanges, generators, barites and other equipments. PTCL spend lot of funds on these items.

4) Loan and advances to others, and re-investment.There are offering of Loan and advances to the employees on various rates according to the length of services on roll. This is the main source of mobilization of funds.

5) Payment of dividend to the stockholders.Payment made to the shareholders in the context of dividend to be paid to the shareholders. PTCL has currently announced the divided of Rs.32/per share.

6) Salaries of the staff all over the country.Obviously services rendered by the staff and in this way PTCL has to pay handsome amount to their staff, those are the main source of generating the revenue.

7) Annual Bonus to employees.PTCL pays annual Bonus of Rs. 12000/- to its employees on the Eid occasion.

8) Security deposits, Transfer of Company’s Land & Building.Where PTCL does not find any building or land then security deposit may be paid to the private landholders for the installation of PTCL infrastructure.

9) Insurance of the CompanyPTCL offers the insurance from its own side in case of death and medically unfit of its employees.

10) Pension, graduate, and other fringe benefits.For the pension and gratuity of the retire official PTCL mobilized its funds accordingly.

11) Supply of Furniture and Fixtures to the office buildings.This is the responsibility of the Management to be provided the furniture and fixture to the office buildings accordingly.

12) Renovation, alteration, and rental charges of privately owned buildings.PTCL has to pay the handsome amount for renovation and alteration of existing building and the charges of privately owned builders are being issued accordingly.

13) Premium paid to the other telecomm companies of different countries in the context of overseas calls and media used.

GENERATION OF FUNDS

1. Amount Realized from System Billing.2. Amount Realized from defaulters.3. Revenue from Value-added Services.

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4. Bandwidth facilities provided to the companies.5. Earning from DXX, PSTN, PABX, VPN, PRI & ISD.6. Media used by cellular and pay-card companies and earn royalty.7. Earning from subsidiaries PTML, PAKNET & TF.8. Amount realized through co-location charges.9. Basic Rate Interface provided to the subscriber.10. International dialing customers.11. Corporate Billing customers, valued customers.12. Earning from MTR mobile Termination Rate.13. Earning from Incoming Overseas Calls in shape of premium from overseas

SOURCES OF FUNDS OF PTCL

Cash generated from operationsIn this context we can say that PTCL usual earning lot much more depends

upon the usual earning from Telephone number and payments of the bill thereof, this is the primary source of funds of PTCL.

Security depositsVarious pay card companies like Dancom, World call, Pearl Tel, Soft tech,

deposited huge amount as the securing deposit in the books of PTCL for the media that is being used by these companies. PTCL is utilizing these security deposits.

Return on depositsAfter payment the dividend to the share holders and having paid the

income tax on the profit the surplus amount is being used in the deposits of various national and multinational banks from where ROD is received accordingly.

Dividend IncomePTCL some time itself purchases the share from the open market and earn the dividend income thereof. It is also possibly that PTCL if applicable may detain the shares of different other companies and earn the dividend.

Sale proceeds of fixed assetsThe defunct and dismantle Telephone exchanges not allowed re-sell to the other underdeveloped countries and gain profit. PTCL is also not in the process of planning to be used the idle land, which could be used on commercial basis by other parties.

Long- Term InvestmentThere are various long-term project of PTCL. BLT is one of them. PTCL is now expanding its business through the United Arab Emirates by consortium and through the joint venture with other telecom operators. PTCL has also some long-term investment in the AT&T (American Telephone & Telegraph) and ZTE (Zehwing Telecom Engineering Company China).

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Long-Term Loan to othersPTCL has also offered long term loan agreement to other Telecom provider companies. PTCL is providing its expertise and Engineers to them and also offering amount to be invested on behalf of PTCL for example PTML Pakistan Telecom Mobile Limited and Paknet the Internet providers company.

Loans, advances, deposits, prepayments and other receivableIn this context all the referred point and return thereof will be called the receivable.

ALLOCATION OF FUNDS

Against all purchase orders issued by the PTCL H/Q’s Islamabad payment made after allocation of Funds which further allocated by the Regional offices. The funds usually allocate in order to manage the following: -

14. Capital expenditure15. Purchase of infrastructure like new exchanges.16. Launching of new Product.17. Human resource development18. Transportation expenses, misc expenses19. Domestic and overseas training of staff20. Bonus to the employees, house/building advances, motor car/motor cycle

advances.21. Worker compensation fund, benevolent fund contribution general provident

fund22. Maintenance of buildings, vehicles, fixed assets.23. Default situation of subsidiaries.

Allocation of Funds for Marketing exploration 19% of net profitAllocation of Funds for Research & development 18% of net profitAllocation of Funds for Human resources & Admn 33% of net profitAllocation of Funds for Corporate affairs 30% of net profit

WAGE & SALARY ADMINISTRATION FUNCTION OF PTCL

Roles and Responsibilities

Supervisors carry much of the responsibility for staff compensation administration within the departments and must do so in accordance with these guidelines. Department administrators, senior business officers, human resource directors and managers, home department coordinators and supervisors are responsible for assuring their department’s compliance with staff posting and classification procedures, including approval and recordkeeping requirements.

These Staff Wage and Salary Guidelines provide departments with a framework around which those internal procedures must be developed and executed. From

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time to time, the Staff Wage and Salary Guidelines may be modified because of special circumstances that require additional restrictions, changes in procedure, or levels of approvals.

Failure to comply with the requirements set forth in university and department policies will be cause for disciplinary action, up to and including termination.

The Pay Roll Deptt is responsible for the following:• Establishing Company compensation principles,• Determining salary and wage guidelines.• Establishing position descriptions in accordance with Company business practices that comply with Govt of Pakistan laws• Determining the classification of positions,• Conducting job audits,• Ensuring departments utilize job descriptions that most appropriately match work performed,• Conducting and participating in compensation surveys• Devising departments on various compensation matters based on both internal and external benchmarking, and• Monitoring departmental compliance with staff posting and classification procedures.

Review and Approval Requirements1. One-Level-Up SupportThe employee’s direct supervisor and the supervisor’s supervisor review request and approve submission to next level.

2. Wing/Department Review and SupportThe most senior position in the department (e.g. EVP, SEVP, etc.) reviews request and approves all discretionary bonuses, mid-year pay increases, overload compensation, merit increases in excess of 3% for eligible staff for next fiscal year.

3. Review and Approval Modified Staff Wage and Salary Guidelines

The Executive Vice President reviews request and determines final approvalfor all discretionary bonuses, mid-year pay increases, overload compensation, merit increases in excess of 3% for eligible staff

Principles

1. Minimum Pay –

All departments must comply with Govt of Pakistan law including minimum pay requirements, minimum wage and salary rates, time and recordkeeping, overtime pay requirements and pay periods

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2. Accountability –

The authority, accountability and responsibility for staff compensation administration lies with supervisors, who are required to execute employment actions in accordance with the policies, practices and guidelines established by the university and additional requirements that may be established by their departments. Supervisors are required to consult with the person to whom they report on all employment decisions and transactions affecting the employees that report directly to them. This requirement for “one Staff Wage and Salary Guidelines level up” review and support applies to all employment decisions including, but not limited to, the determination of, or changes in, salary and wages rates, bonus compensation, perquisites, budget allocation, job postings, employment offers, changes in the terms and conditions of employment, hiring, promotions, demotions, reorganizations, and terminations.

3. Pay Practices – Supervisors are accountable for and expected to establish and maintain pay in accordance with these staff wage and salary guidelines and the additional requirements which are prescribed by the president, executive vice president and senior vice president for administration. When determining wage or salary rates or other compensation, perquisites and non-standard benefits, factors such as marketplace comparisons, the education and experience of the individual, fair and equitable distribution among employees in the same or similar position classifications, individual performance, and available funding must be considered.

4. Pay Comparisons – The compensation staff in Payroll Section is available to assist departments in reviewing compensation on a case-by-case basis. The compensation staff will provide departments with salary/wage averages by position.

Departments should utilize the recommended hiring ranges as a guide to establishing starting wage and salary rates for newly hired, rehired or transferred staff.

5. Funding – Funding for staff compensation is allocated during the budget approval process each fiscal year. Changes to this allocation may only be made during the annual budget approval process or through a specific mid-year budget amendment or modification request, which has been reviewed and approved by the competent authority.

6. Annual Pay Increases – Annual staff pay increases must follow the “Review and Approval Requirements” and limitations described in these guidelines. Annual staff pay increases are

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merit-based and should vary according to individual performance and the amount of funding available.

Every employee should be informed, in writing, of his or her annual merit increase and new rate of pay, if applicable, before July 1. The reason for the amount of the increase, or lack thereof, should be described and documentation must be retained in the employee’s file.

Performance evaluations should be based on performance sustained over time and documented in writing. Employees must be given the opportunity to comment on the evaluation documentation. Both the evaluation and the employee’s comments must be retained in the employee’s file.

7. Pay for Transfers and Rehires – Employees who transfer or are rehired into posted positions should receive compensation appropriate to the new position, their experience and qualifications and available funding as described in number three above. Employees are not guaranteed the rate of pay associated with their previous position or guaranteed any increase because of a move to a new position.

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SWOT ANALYSIS:

Strengths

Weakness

Opportunities

Threats

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CONCLUSION & RECOMMENDATION

Where differentials perform important economic functions like labour

productivity, attracting the people to different jobs. Since most of the workers are

mobile with a view to maximizing their earnings, wage differentials reflect the

variations in productivity, efficiency of management, maximum utilization of

human force, etc. Attracting efficient workers, maximization of employee’s

commitment, and development of skills. Knowledge, utilization of human

resources, maximization of productivity can be fulfilled through wage differentials

as the latter determines the direct allocation of manpower among different units,

occupations and regions so that the overall production can be maximized. Thus,

wage differentials provide an incentive for better allocation of human force –

labour mobility among different regions and the like.

Wage differentials play a pivotal role in a planned economy in the regulation of

wages and development of national wage policy by allocating the skilled human

force on priority basis. Development of new skills, knowledge, etc. is an essential

parts of human resource development. Shortage of technical and skilled

personnel is not only a problem for industries but it creates bottlenecks in the

attainment of planned goals. Thus, wage differentials, to a certain extent, are

desirable from the viewpoint of national interest. As such, they probably become

an essential part of the national wage policy. Complete uniform national wage

policy is impracticable and undesirable.

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Documents

2nd Assignment of Compensation Management-- Amjad Baig