Continuing my search for building “soft infrastructure” of a small organization, I am doing some very basic study of human resource managment from employee perspective. These are some of the documents and process which must be there for any  small organization in India.

• Pay Slip

  – Minimum Wage (Central) Rules, 1950, Rule 26(4) and Minimum Wage (Central) Rules, 1950, Rule 26(3)  .

The payslips are required to let the employee know of what his net pay is (by clearly indicating on salary slips various components and deductions: statutory and administrative). Providing a salary slip is important, as it indicates to an employee the basis of all his net earnings and deductions for a particular month.A salary slip provides and instant help for individuals who are trying to get financial support for banking/financial institutions. It provides a proof of continuity in service (usually any kind of financial help required from a bank calls for provision of 3 months salary slips & the account statements of the salary account )

• Form 16 & Form 16 A

Form 16 & Form 16 A are required for filing income tax returns every financial year by the employer ,which contains details of salary paid for the year and remittance if any made into banks where TDS is deducted / effected. You would require your salary slips for the period worked with the organisation. And most important they have to give a Form 16 if they have deducted TDS from your salary.

• Increment Letter

A letter template like this

____/HRD/_____

Date :

Mr./Ms.___________________
________________
___________
____________
Dear Mr. ______________,
Consequent to the review of your performance during the period of 13/11/2008 to 31/05/2009, we have pleasure in informing you that, w.e.f 01/06/2007 your salary is being increased as follows:
Break up of Salary
Salary Head Existing Revised
Basic 2000 4000
HRA 1200 2400
TA 800 800
Other Allowance 5000 6800
Gross Per Month 9000 14000
Gross Per Annum 108000 168000
Mobile Reimbursement / Annum 12000 12000
Fixed Amount / Annum 60000 100000
Annual Fixed Gross Cost 180000 280000
EX-Gratia 10000 20000
Annual Total Cost 190000 300000
The other terms and conditions of your appointment remain unchanged.
We look forward to your valuable contributions and wish you all the very best for a rewarding career with the organisation.
Please sign the duplicate copy of this letter as a token of acceptance of the same.
For, Company Name
Name:
Designation:

• Offer Letter

I found a lot of employees of start-ups don’t have offer letters.

• Health Care Benefits / Mediclaim Insurance

Mediclaim Policy is an Insurance coverage wherein any of your Health related hospitalisation bills can be claimed from the insurance company. There are two different ways to get your bills claimed either by cashless facility i.e your bills are directly paid to the hospital or you can pay your bills in the hospital and get an reimbursement after submission of the same to the insurance company.First you cannot deduct premium amount from employee salary until employee give his consent for the same. In case any company want to deduct medical insurance amount from employee salary then company need to take written consent from them.

• Leave Policy

There are various types of leaves. But, for small organizations, here’s an example

1. 24 leaves a year for (2 paid leaves a month)
2. The leaves are applicable only after confirmation. And one gets leave prorata.
for example: An employee joins in January, he gets confirmed in July. So the number of leaves available to him would be 12. (for period between July and December)
3. Leaves taken during probation would result in LOP. (loss of Pay).
4. A confirmed employee can take leaves as and when desired.(since these are paid leaves, and are subject to the manager’s approvals)
5. All leaves taken need to be tracked.
6. In December, the total leaves taken and balance leaves are calculated.
7. 50 % of balance leaves are encashed (on basic salary) and the rest 50% are carried forward (subject to a maximum of 10 leaves)
8. For the next year a member will be allotted 24 leaves + 10 carried forward leaves.
9. If there is negative balance (i.e an employee used more leaves than available, the same shall get deducted in the December salary)

If an employee is leaving:
Leaves get encashed (all the available leaves)
In case of negative balance the same gets deducted in the full and final settlement.

Restricting the abuse of leave policy:
1. The average leaves one can take in any month is 2.
2. Leaves which are more than 3 days need to be presanctioned by the reporting manager at least a month before.
3. In case one has to take leaves in emergency, it is mandatory that he/she communicates within the first 3 hours of work day on the first day of leave.

• List of Holidays

Holiday calendar is important for an organization. 

The “selfish group” including politicians and  pharma businesses has come up with another idea. Swine Flu. “In a country where half the politicians are pigs, swine flu is inevitable.”

Step 1 : Manufacture the virus (swine flu) in lab and put it in commonly used vaccines. Source

Step 2 : Export the infected vaccines across the world.

Step 3 :  Inject fear by putting the news of h1n1 swine flu cases on every damn TV channel and new media (twitter sheeps) reporting the numbers of infected cases. Swine Flu = 141 deaths (in total). No access to clean water = 5,000 deaths (every day, mostly children).

Regular flu death rate: 0.6%. H1N1 0.0056%.  The Swine Flu (H1N1) has killed 194 people & it is considered a pandemic?Really?Considering flu kills 250k+ a year Im confused.

Step 4 :  If you are a pharma company with investment of millions in the medicine of  swine flu. Be ready to ship  stockpiles of antiviral drugs like Roche’s Tamiflu and GlaxoSmithKline’s Relenza and see your stocks in sky. Novartis and some other companies are also lining up with their vaccines.

Step 5 : Deviate American public and world  from real issues of concern for atleast few months.  How about somebody reporting Americans are 3 trillion dollars in debt or people losing jobs ? That is boring now.

Step 6 : Give Loan to poor nations as they can’t buy the medicines and test kits and take control.Control. Read this.

Step 7: Start selling masks if you are best buy or walmart. Promote tourism in your country by paying thousands of dollars to swine flu patients.

Step 8 : People start losing interest in stupid hype of swine flu. Drop the bomb. Bribe WHO to make it pandemic (level 6).A pandemic means a disease that is spreading rapidly, crossing borders etc eg H1N1 swine flu; it does not mean the disease is more severe

Step 9 : Ask people to take vaccine (which obviously are already INFECTED). Sell medicines in black market at high price. People are stupid. They will recommend their friends having cold to test against H1N1. Sell more test kits to public health authorities.

Step 10 : Great. Damage is done. Now think about another pandemic with pharma companies for next quarter of century.

I was thinking of exit strategy for any startup.Whether its a separate business unity or altogether a new company.  Is the company pieced together for a quick flip, or build for multi-year significant value creation, or plan on holding for the long term as an eventual revenue generator (for founder/investors)?

For a founder, having an exit strategy is good. Creating a company providing long term value can be little disturbing for some founders. But, an employee might have mixed emotions and motivation  when he gets to know that the corporation is being built for a quick flip.

One way to ascertain the quick flip mentality is to see the too frequent too many strategic changes. If you are a  service company, then migrating to product company or combination or  changing tracks to a  new opportunity without properly evaluating the opportunities are some signs of flip mentality . There is hardly a significant scalability in one particular business unit after initial success. It is not surprising therefore to see most startups built with flip mentality  flounder after achieving initial success. The capabilities within the company need to be continuously enhanced if the company is to reach subsequent levels of growth with each level being built on a strong foundation.

The soft infrastructure like human resource processes, operational management, sales organization , organization charts, cash flow managment, program management are very critical aspects of running and growing a company. Recently, my friend was not well and he realised that there is not any sick leave/ leave  policy for one of the  startup company in business for 5 years. Creating these kind of systems require a lot of effort.  Companies with flip thinking and startups do not pay attention or consider it too much overhead to the need for creating the soft infrastructure within the company. I read somewhere, “even If you are building a startup with the intention of flipping it to one of the majors, only three things matter; technology, clients and the quality of your team.” And all these things directly depend on soft infrastructure of your company.

If you are joining a new startup or small company with flip thinking, and if you are going to be very early among like first 10 employees , its good to know the total outstanding shares of the company and politely ask a percentage your shares represents in addition to your salary. In a new company , it’s not how many; it’s what percentage of shares.

In one of the companies I worked for previously, the company offered me shares but never told me the total number of shares outstanding. If the company is unwilling to let you know what 100 shares equates to in terms of percentage interest in the company, I’d say that’s a warning sign and you should ask lots more questions.

I have been trying to understand the concept of  fixed salary and ideas of bonus or profit sharing in  software consulting assignments especially where billing happens on the basis of number of hours instead of fixed budget projects.  

What happens, as a software developer, when the company bills dedicated developer time to the clients ? A lot of developers like to be paid certain percentage of numbers of hours put  instead(or,in addition) of fixed monthly salary.Their thinking is that if you work for hours, you should get  paid in some way for that hour.  But, then there are companies that offers bonus if that dedicated developer files over , say X hours.  In that case, you get salary but, there is a carrot hanging to file more hours. So I get a salary all the time and if I bill over 150 hours in a month I get a bonus that’s a percentage of whatever’s over 150. 

Having a bonus or better appraisal for the ability to file more hours doesn’t sound right to me. In that case, somehow the company gives an incentive to the developer to fiddle his hours, since doing so affects his paycheck. This bonus/appraisal clause will have been removed in few cases after the company realised that some employees have been booking hours simply to get a bigger paycheck.

Companies paying fixed salaries need to somehow ensure that the developers work efficiently, i.e. maximize their billing. Whether this is by carrots , or by regular appraisals, it is wrong to think that fixed salaried employees do not have incentives to over charge the client. The advantage of profit sharing  to the company is that the fixed salary costs of the senior developers who are the more expensive employees are converted into variable costs. This makes balancing accounts easier, particularly when there are less projects. Companies paying their developers fixed salaries will, if work drops off, have to cut those salaries.  Both systems respond to business scenario, but when the salaries are closely linked to the billing, the response is more immediate.

In that case, perhaps you should ask yourself whether you really want to work for a company whose prime focus is maximizing dollars (with no incentives for quality of work or customer satisfaction) and couldn’t even come up with a sensible reward system. In general, the employer – employee relationship may be such that invariably the employer feels that the employee is not working as hard as he could ,  and the employee feels that he is underpaid or not . A system where the developer’s take-home pay is directly affected by the number of hours billed, may tempt to fiddle the number of hours billed.

In case of specialized skills, dev shops paying a fixed salary will not pay more than the minimum needed to attract and maintain software developers. Devshops paying a percentage will pay the lowest percentage they can get away with. The programmer usually will move to the firm where he /she can earn more.Also , the employees engaged in fixed salary basis assumes the connection between their salaries and billing therefore, have a motivation to create separate profit centres inside a company taking the firm into a hub employing freelancers on a percentage basis in long term.

From the client perspective, the important issues for the client are the skills and the work ethic of the specific developer and the standards of the firm for whom he or she works.  Clients have to trust that the developer of the company, does not fiddle the hours. 

There is a definite distinction in the case of software engineers who are paid fixed salaries, and have motivations anywhere between “incentives to bill”, and “incentives to overbill”. Obviously, developers must accurately bill their work, and their time must be efficiently invested in billable hours. Is operating otherwise  irresponsible and stupid ? Definitely Yes. However, developers must also know that overbilling can immediately backfire at them. Companies who want to maintain a fair and long-term relationship with their clients must ensure that the correct balance is maintained, so that all time spent working for clients is billed and, at the same time, no benefit is derived by the developer or project manager from billing even an hour more than he has actually spent.

This is definitely a deep topic to be thought about and I have just scratched the surface.

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I have been working on finding a compensation plan for a ruby on rails company.

I am trying to formulate a model for compensation that aims to help
developers gauge their salary and benefits. Compensation is a vast
subject and I am just a newbie/ generalist in that.

we started with Joel’s model http://joelonsoftware.com/articles/ladder.html
tweaked it little bit to add "soft skills" as one of the parameters
(which includes attitude, client service, innovation, ownership etc).

The purpose of joel’s model is to create a single rate structure (all employees in the same job level receive the same pay) based on skills, scope and experience.

How do you create a desired mix of cash/benefits (like gadgets/flexi time/conferences)?

What your organization pays for – seniority or performance or
combination ?

How do you establish the pay ranges ?

or,How do you calculate base salary for developers in your
organization ? These are some of the questions I am trying to find answers for.

Finding the base salary is something which I am  interested in….which depends on some of the following factors

may be the internal equity(perceived worth of a job relative to other jobs in the company),  external equity(market rates/lifestyle and quality of life in other organizations ), individual equity ( developers perception of how they are being paid compared to others) , process equity( how every employee consider the fairness of compensation system) are some of the very important factors.

One of the most important factors I learnt, from the employee/employer perspective,

Even if the company goes for single rate structure like joel’s model , the model can fail when a level 9 developer will bring substantial more revenue than level 14 developer irrespective of scope, experience and skills

If your company is small enough, the most important factor might be revenue. If you earn the company money, there will be more available for you. Even in larger organizations it can be very valuable to show how you generate value and (hopefully) revenue.The very foundation of capitalism is that you pay people for what value they provide you.

Any help or inputs on compensation plan will be highly appreciated.