Leadership ....

Leadership Theory The word leadership can refer to:
1. Those entities that perform one or more acts of leading.
 2. The ability to affect human behavior so as to accomplish a mission.
 3. Influencing a group of people to move towards its goal setting or goal achievement. (Stogdill 1950: 3) A leader is simply someone who has followers.
Types of leadership styles
The bureaucratic leader (Weber, 1905)[1] is very structured and follows the procedures as they have been established. charismatic leader
 The charismatic leader (Weber, 1905) leads by infusing energy and eagerness into heir team members
 The autocratic leader is given the power to make decisions alone, having total authority.
 The democratic leader listens to the team's ideas and studies them,.
The laissez-faire ("let do") leader gives no continuous feedback or supervision because the employees are highly experienced and need little supervision to obtain the expected outcome.
 The people-oriented leader is the one that, in order to comply with effectiveness and efficiency, supports, trains and develops his personnel, increasing job satisfaction and genuine interest to do a good job.
 The task-oriented leader focus on the job, and concentrate on the specific tasks assigned to each employee to reach goal accomplishment.
 The servant leader facilitates goal accomplishment by giving its team members what they need in order to be productive
The transaction leader is given power to perform certain tasks and reward or punish for the team’s performance.
The transformation leader motivates its team to be effective and efficient. environment leader The environment leader is the one who nurtures group or organisational environment to affect the emotional and psychological perception of an individual’s place in that group or organisation.

PF facts...

FREQUENTLY ASKED QUESTIONS ON PROVIDENT FUND Q1) What is the Contribution for Provident Fund both by the Employer & Employee ? Ans : The Employee contributes 12% of his /her Basic Salary & the same amount is contributed by the Employer. Q2) Is it Compulsory for the all the employees to contribute to the Provident Fund ? Ans : Employees drawing basic salary upto Rs 6500/- have to compulsory contribute to the Provident fund and employees drawing above Rs 6501/- have an option to become member of the Provident Fund . Q3) Is it beneficial for employees who draw salary above Rs 6501/- to become member of Provident Fund ? Ans Yes because provident fund contribution by the employer & employee is not a taxable income for Income Tax purpose. Q4) What if an employee while joining establishment has a basic salary of Rs 4200 and after some period of time his basic salary increases above Rs 6501/-, does he have an option to terminate his member ship form the Provident fund act? Ans : Employee who while joining the organisation has a basic salary above Rs 6501/- have an option to either become or avoid becoming member of Provident fund but employees whose basic salary while joining the organisation is less then Rs 6501/- but after some period of time their basic increases above Rs 6501/- have to compulsorily continue to be member of provident Fund. Q5) What is the contribution percentage to the Provident fund and Pension Scheme ? Ans : Employers contribution of 12% of basic salary is totally deposited in provident fund account Whereas out of Employees contribution of 12% , 3.67% is contributed to Provident fund and 8.33% is deposited in Pension scheme. Q6) Which form has to be filled while becoming member of provident fund ? Ans : Nomination Form No 2 has to be filled to become a member of the Provident fund, form is available with HR department . Q7 ) Which form has to be filled while transferring provident fund deposit ? Ans : You just have to fill form no 13 to transfer your P.F amount. Q8 ) What is the provision of the scheme in the matter of nomination by a member ? Ans : Each member has to make a nomination to receive the amount standing to his credit in the fund in the event of his death. If he has a family, he has to nominate one or more person belonging to his family and none other. If he has no family he can nominate any person or persons of his choice but if he subsequently acquires family, such nomination becomes invalid and he will have to make a fresh nomination of one or more persons belonging to his family. You cannot make your brother your nominee as per the Acts. Q9 ) When is an employee eligible to enjoy pension scheme ? Ans : For an employee to become eligible for Pension fund, he has to complete membership of the Fund for 10 Years. Q10 ) What does it mean by continuous service of ten years ? Ans : When we say continuous service of 10 years in Employee Pension Fund, we mean to say that during services, for e.g., an employee who has worked with X company for say 3 years, then he resigned from that organisation and joined Y company, wherein he worked for 2 years, then resigned from there to join establishment for 5 years but during these 10 years of service he has not withdrawn but transferred his Employee pension fund, then we say continuous service of ten years. Q11 ) When can an employee avail the benefit of Employee pension fund scheme which he has contributed during his ten years of continues service? Ans : An employee can avail the benefit after completion of 58 years of service. Q12 ) What happens to the provident fund & Employee Pension fund if an employee who wants to resign from the service before completion of ten years of continues service? Ans : Employee can withdraw the PF accumulations by filling Forms 19 & 10 C which is available with the HR department. Q13 ) What is this 19 & 10C form ? Ans : Form No 19 is for Provident fund withdrawal & Form No. 10 C is for Pension scheme withdrawal. Q14 ) Do we get any interest on the amount which is deposited in the Provident Fund account? Ans : Compound interest as declared by the Govt. is given for every year of service. Q15 ) What is the accounting year for Provident fund account? Ans : Accounting year is from March to February. Q16 ) What are the benefits provided under Employee Provident Fund Scheme?Ans : Two kinds of benefits are provided under the scheme- a) Withdrawal benefit) Benefit of non -Refundable advancesQ18 ) What is the purpose of the Employee's Pension Scheme ? Ans : The purpose of the scheme is to provide for1) Superannuation pension.2) Retiring Pension.3) Permanent Total disablement PensionSuperannuation Pension: Member who has rendered eligible service of 20 years and retires on attaining the age of 58 years.Retirement Pension: member who has rendered eligible service of 20 years and retires or otherwise ceases to be in employment before attaining the age of 58 years.Short service Pension: Member has to render eligible service of 10 years and more but less than 20 years. Q19 ) How much time does it take to receive P.F & pension money if an employee resigns from the Service? Ans : Normally the procedure for receiving P.F & Pension money is , the employee has to fill 19 & 10 c Form and submit the same to PF Desk , which is then submitted to the P.F office after two months, this two months is nothing but a waiting period as the rules are that an employee should not be in employment for two months after resigning if he has to withdraw his P.F amount. After completion of two months the form is submitted to the regional provident fund Commissioner office after which the employee receives his amount along with interest within a period of 90 days. Q20 ) Do we receive money through postal order ? Ans Previously there was a procedure wherein member use to get P.F through Postal order but now While submitting the P.F form withdrawal form you have to mention your saving Bank account No. & the complete address of the Bank where you hold the account. Q21 ) How would I know the amount of accumulations in my PF account ? Ans : PF office sends an annual statement through the employer which gives details about the PF accumulations. The statement contains details like, Opening balance, amount contributed during the year, withdrawal during the year, interest earned and the closing balance in the PF account. This statement is sent by the PF department on completion of the financial year. Q22 ) Which establishments are covered by the Act ? Ans : Any establishment which employs 20 or more employees. Except apprentice and casual laborers, every Employee including contract labour who is in receipt of basic salary up to Rs. 6500 p.m. is covered by the Act. Q23 ) In case after registering the establishment at any point in time, the number of employees working in it becomes less than 20 then will the Act apply ? Ans : Any establishment which has been covered under the Act once shall continue to be governed by the Act even if the number of persons employed therein at any time falls below 20. Q24 ) Is the Act applicable to a factory which is closed down but is employing a few employees to look after the assets of the establishment ? Ans : No, Where the establishment is closed down and only four security men are employed for keeping a watch over the assets and properties of the establishments, the Act would not be applicable. Q25 ) Is a trainee an employee under the Act ? Ans : Yes, a trainee would be considered as an employee as per the Act but in case the trainee is an apprentice under the Apprentice's Act then he/ she will not be considered as an employee under this Act. Q26) Is it possible to appeal the orders of the Central Government or the Central Provident Fund Commissioner ? Ans : Yes, there is a body called as Provident Fund Appellate Tribunal where an employer can appeal. Q27 ) Who is the authority to decide regarding the disputes if any ? Ans : In case there is a dispute regarding the applicability of the Act or the quantum of money to be deducted etc. the authority to decide are the i)Central Provident Fund Commissioner,ii)any Additional Provident Fund Commissioner, iii)any Additional Central Provident Fund Commissioner iv)any Deputy Provident Fund Commissioner v)any Regional Provident Fund Commissioner orvi)any Assistant Provident Fund Commissioner Q28 ) What in case there are workers involved as Contract labour ? Ans : It is the responsibility of the Contractor to deduct the PF and submit a statement to the Principal Employer in the prescribed format by 7th of every month. The Company becomes the Principal Employer would be responsible for the PF deduction of the workers employed on contract basis. Q29 ) Are the persons employed by or through a contractor covered under the Scheme ? Ans : Persons employed by or through a contractor are included in the definition of " employee " under the Employee's Provident Finds Act, 1952, and as such, they are covered under the Scheme. Q30 ) In case the Contractor fails to deduct and submit the PF amount from the contract workers then what is to be done ? Ans : The Company being the Principal employer is responsible for the PF to be deducted from the Contract workers as well. In case the Contractors fails to deduct and submit the PF dues then the Company has to pay the amount and can later on recover the amount from the Contractor. Q31 ) Could the employer be punished in case the remittance of contribution by him is delayed in a Bank or post office ? Ans : Employer cannot be punished or penalized in case there is a delay in the remittance of the contribution on account of delay in Bank or post office. Q32 ) What happens in case there is a salary revision and a raise in the basic salary of the employee and arrears need to be paid, Do we need to deduct PF from the arrears as well ? Ans : Arrears are considered to be emoluments earned by the employee and PF is to be deducted from such arrears. Q33 ) Is it possible for an employee to contribute at a higher rate of interest than 12 % ? Ans : Yes, if an employee desires to contribute an amount at a higher rate of interest than 12 % of basic salary then they can do so but it does not become obligatory for the employer to pay anything above than 12 %.This is called voluntary contribution and a Joint Declaration Form needs to be filled up where the employer and the employee both have to give a declaration as to the rate at which PF would be deducted.

CAN SERVICES OF AN EMPLOYEE BE TERMINATED WITHOUT CONDUCTING DOMESTIC ENQUIRY?

The right of hearing is a fundamental right. Under law, no person can be accused of anything without giving him proper opportunity of being heard. Principles of Natural Justice are part and parcel of civilised society. Therefore even law provides for conducting enquiries when employer observes that an employee has committed misconduct. Industrial Employment (Standing Orders) Act, 1946 provides for the procedure for conducting enquiries. The enquiry is conducted to ascertain whose contention, the management’s or the worker’s, is correct and what the worker has to say about his alleged misconduct. The Standing Orders provide for issuance of a Charge Sheet. On issuance of Charge Sheet the management has to prove its charges by leading evidence. The worker has the right to cross examine the management witnesses. The worker also has the right to lead evidence. The witnesses examined by the workers can be cross examined by the management. However, the law of evidence is not applicable to the enquiry. On this background whether management can terminate services of the employee without holding enquiry into the allegation of misconduct is examined – The employer per se cannot dispense with enquiry, however, in the rarest of rare cases if the employer is unable to conduct domestic enquiry or it is impossible for the management in the interest of the organisation to continue with the services of the employee, the employer can terminate the services without holding a domestic enquiry. However such termination has to be justified before the Court and the employer shall have to place or record reasons for not conducting the enquiry. The Courts in many matters have held that if there has been appropriate domestic enquiry or no enquiry at all before disciplinary action was taken, it is open to the employer to ask for the opportunity to lead evidence in case of inappropriate domestic enquiry or no enquiry, at the earliest stage of the proceedings. There has to be concise pleading to this effect in the Written Statement. In the absence of such concise pleadings and not availing the opportunity at the earliest, the Courts may not grant the employer to lead evidence. The law stands clear on the issue that if an employee is terminated without domestic enquiry it shall be open to the employer to explain such termination in the course of adjudication. An employer should be very careful about terminating the services of the employee without domestic enquiry. It should be a highly exceptional and not a standard practice. The Hon’ble Bombay High Court in Manohar P. Kharkar and another V/s Raghuraj and another (Writ Petition No. 658 of 1981, decided on: 18.09.1981) held that the decision for terminating an employee on the grounds of misconduct may be without domestic enquiry but the same may be challenged before the Labour court by the aggrieved employee in reference and the Management shall have to justify such termination before the Labour Court. The Labour Court or Industrial Court would then have to adjudge the truth or the misconduct on merits. Further, in Kamal Kishore Lakshman V/s Pan American World Airways (Civil Appeal No. 2568 of 1986, decided on 03.12.1986) the Hon’ble Supreme Court held that – “The legal position firmly established is that if there has been no appropriate domestic enquiry or no enquiry at all before disciplinary action is taken, it is open to the employer to ask for such opportunity in the course of adjudication.”

DPSP

The Directive Principles of State Policy are guidelines to the central and state governments of India, to be kept in mind while framing laws and policies. These provisions, contained in Part IV of the Constitution of India, are not enforceable by any court, but the principles laid down therein are considered fundamental in the governance of the country, making it the duty of the State to apply these principles in making laws to establish a just society in the country. The principles have been inspired by the Directive Principles given in the Constitution of Ireland and also by the principles of Gandhism; and relate to social justice, economic welfare, foreign policy, and legal and administrative matters.
Directive Principles are classified under the following categories: Gandhian, economic and socialistic, political and administrative, justice and legal, environmental, protection of monuments and peace and security.The concept of Directive Principles of State Policy was borrowed from the Irish Constitution. The makers of the Constitution of India were influenced by the Irish nationalist movement. Hence, the Directive Principles of the Indian constitution have been greatly influenced by the Directive Principles of State Policy.
Directive Principles of State Policy
The Directive Principles of State Policy, embodied in Part IV of the Constitution, are directions given to the State to guide the establishment of an economic and social democracy, as proposed by the Preamble. They set forth the humanitarian and socialist instructions that were the aim of social revolution envisaged in India by the Constituent Assembly. The State is expected to keep these principles in mind while framing laws and policies, even though they are non-justiciable in nature. The Directive Principles may be classified under the following categories: ideals that the State ought to strive towards achieving; directions for the exercise of legislative and executive power; and rights of the citizens which the State must aim towards securing.
Despite being non-justiciable, the Directive Principles act as a check on the State; theorised as a yardstick in the hands of the electorate and the opposition to measure the performance of a government at the time of an election.Article 37, while stating that the Directive Principles are not enforceable in any court of law, declares them to be "fundamental to the governance of the country" and imposes an obligation on the State to apply them in matters of legislation.Thus, they serve to emphasise the welfare state model of the Constitution and emphasise the positive duty of the State to promote the welfare of the people by affirming social, economic and political justice, as well as to fight income inequality and ensure individual dignity, as mandated by Article 38
Article 39 lays down certain principles of policy to be followed by the State, including providing an adequate means of livelihood for all citizens, equal pay for equal work for men and women, proper working conditions, reduction of the concentration of wealth and means of production from the hands of a few, and distribution of community resources to "subserve the common good".These clauses highlight the Constututional objectives of building an egalitarian social order and establishing a welfare state, by bringing about a social revolution assisted by the State, and have been used to support the nationalisation of mineral resources as well as public utilities.Further, several legislations pertaining to agrarian reform and land tenure have been enacted by the federal and state governments, in order to ensure equitable distribution of land resources
Articles 41–43 mandate the State to endeavour to secure to all citizens the right to work, a living wage, social security, maternity relief, and a decent standard of living These provisions aim at establishing a socialist state as envisaged in the Preamble. Article 43 also places upon the State the responsibility of promoting cottage industries, and the federal government has, in furtherance of this, established several Boards for the promotion of khadi, handlooms etc., in coordination with the state governments.Article 39A requires the State to provide free legal aid to ensure that opportunities for securing justice are available to all citizens irrespective of economic or other disabilities. Article 43A mandates the State to work towards securing the participation of workers in the management of industries./The State, under Article 46, is also mandated to promote the interests of and work for the economic uplift of the scheduled castes and scheduled tribes and protect them from discrimination and exploitation. Several enactments, including two Constitutional amendments, have been passed to give effect to this provision.
Article 44 encourages the State to secure a uniform civil code for all citizens, by eliminating discrepancies between various personal laws currently in force in the country. However, this has remained a "dead letter" despite numerous reminders from the Supreme Court to implement the provision. Article 45 originally mandated the State to provide free and compulsory education to children between the ages of six and fourteen years but after the 86th Amendment in 2002, this has been converted into a Fundamental Right and replaced by an obligation upon the State to secure childhood care to all children below the age of six. Article 47 commits the State to raise the standard of living and improve public health, and prohibit the consumption of intoxicating drinks and drugs injurious to health.As a consequence, partial or total prohibition has been introduced in several states, but financial constraints have prevented its full-fledged application.he State is also mandated by Article 48 to organise agriculture and animal husbandry on modern and scientific lines by improving breeds and prohibiting slaughter of cattle.[93] Article 48A mandates the State to protect the environment and safeguard the forests and wildlife of the country, while Article 49 places an obligation upon the State to ensure the preservation of monuments and objects of national importance.Article 50 requires the State to ensure the separation of judiciary from executive in public services, in order to ensure judicial independence, and federal legislation has been enacted to achieve this objective The State, according to Article 51, must also strive for the promotion of international peace and security, and Parliament has been empowered under Article 253 to make laws giving effect to international treaties



16. (1) Equality of opportunity in matters of public employment.
There shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State


24. Prohibition of
employment of
children in
factories, etc.
No child below the age of fourteen years shall be
employed to work in any factory or mine or engaged in
any other hazardous employment.
38. State to secure a social order for the promotion of welfare of the people.

1[(1)] The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life.

39d)
that there is equal pay for equal work for both men and women;
(a) that the citizens, men and women equally, have the right to an adequate means of livelihood;

[39A. Equal justice and free legal aid.

The State shall secure that the operation of the legal system promotes justice, on a basis of equal opportunity, and shall, in particular, provide free legal aid, by suitable legislation or schemes or in any other way, to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities.

41. Right to work, to education and to public assistance in certain cases.

The State shall, within the limits of its economic capacity and development, make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old age, sickness and disablement, and in other cases of undeserved want

42.Provision for just and humane conditions of work and maternityrelief.

The State shall make provision for securing just
and humane conditions of work and for maternity relief

1[43A. Participation of workers in management of industries.

The State shall take steps, by suitable legislation or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry.



43.Living wage, etc.,for workers

The State shall endeavour to secure, by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities and, in particular, the State shall endeavour to promote cottage industries on an
individual or co-operative basis in rural areas

Motivational Story

The Elephant Rope

As a man was passing the elephants, he suddenly stopped, confused by the fact that these huge creatures were being held by only a small rope tied to their front leg. No chains, no cages. It was obvious that the elephants could, at anytime, break away from their bonds but for some reason, they did not.

He saw a trainer nearby and asked why these animals just stood there and made no attempt to get away. “Well,” trainer said, “when they are very young and much smaller we use the same size rope to tie them and, at that age, it’s enough to hold them. As they grow up, they are conditioned to believe they cannot break away. They believe the rope can still hold them, so they never try to break free.”

The man was amazed. These animals could at any time break free from their bonds but because they believed they couldn’t, they were stuck right where they were.

Like the elephants, how many of us go through life hanging onto a belief that we cannot do something, simply because we failed at it once before?

Failure is part of learning; we should never give up the struggle in life.

31 Core Competencies

List of 31 Core Competencies
The following is a summarized list of the 31 competencies listed by "cluster" (similar
competencies related to a common skill set).
I. Competencies Dealing with People
1. Establishing Focus: The ability to develop and communicate goals in support of the
business' mission.
2. Providing Motivational Support: The ability to enhance others' commitment to their work.
3. Fostering Teamwork: As a team member, the ability and desire to work cooperatively with
others on a team; as a team leader, the ability to demonstrate interest, skill, and success in
getting groups to learn to work together.
4. Empowering Others: The ability to convey confidence in employees' ability to be
successful, especially at challenging new tasks; delegating significant responsibility and
authority; allowing employees freedom to decide how they will accomplish their goals and
resolve issues.
5. Managing Change: The ability to demonstrate support for innovation and for organizational
changes needed to improve the organization's effectiveness; initiating, sponsoring, and
implementing organizational change; helping others to successfully manage organizational
change.
6. Developing Others: The ability to delegate responsibility and to work with others and coach
them to develop their capabilities.
7. Managing Performance: The ability to take responsibility for one's own or one's employees'
performance, by setting clear goals and expectations, tracking progress against the goals,
ensuring feedback, and addressing performance problems and issues promptly.
8. Attention to Communication: The ability to ensure that information is passed on to others
who should be kept informed.
9. Oral Communication: The ability to express oneself clearly in conversations and
interactions with others.
10. Written Communication: The ability to express oneself clearly in business writing.
11. Persuasive Communication: The ability to plan and deliver oral and written
communications that make an impact and persuade their intended audiences.
12. Interpersonal Awareness: The ability to notice, interpret, and anticipate others' concerns
and feelings, and to communicate this awareness empathetically to others.
13. Influencing Others: The ability to gain others' support for ideas, proposals, projects, and
solutions.
14. Building Collaborative Relationships: The ability to develop, maintain, and strengthen
partnerships with others inside or outside the organization who can provide information,
assistance, and support.
15. Customer Orientation: The ability to demonstrate concern for satisfying one's external
and/or internal customers.
II. Compentencies Dealing with Business
16. Diagnostic Information Gathering: The ability to identify the information needed to clarify
a situation, seek that information from appropriate sources, and use skillful questioning to
draw out the information, when others are reluctant to disclose it
17. Analytical Thinking: The ability to tackle a problem by using a logical, systematic,
sequential approach.
18. Forward Thinking: The ability to anticipate the implications and consequences of situations
and take appropriate action to be prepared for possible contingencies.
19. Conceptual Thinking: The ability to find effective solutions by taking a holistic, abstract, or
theoretical perspective.
20. Strategic Thinking: The ability to analyze the organization's competitive position by
considering market and industry trends, existing and potential customers (internal and
external), and strengths and weaknesses as compared to competitors.
21. Technical Expertise: The ability to demonstrate depth of knowledge and skill in a technical
area.
22. Initiative: Identifying what needs to be done and doing it before being asked or before the
situation requires it.
23. Entrepreneurial Orientation: The ability to look for and seize profitable business
opportunities; willingness to take calculated risks to achieve business goals.
24. Fostering Innovation: The ability to develop, sponsor, or support the introduction of new
and improved method, products, procedures, or technologies.
25. Results Orientation: The ability to focus on the desired result of one's own or one's unit's
work, setting challenging goals, focusing effort on the goals, and meeting or exceeding them.
26. Thoroughness: Ensuring that one's own and others' work and information are complete and
accurate; carefully preparing for meetings and presentations; following up with others to
ensure that agreements and commitments have been fulfilled.
27. Decisiveness: The ability to make difficult decisions in a timely manner.
III. Self-Management Competencies
28. Self Confidence: Faith in one's own ideas and capability to be successful; willingness to take
an independent position in the face of opposition.
29. Stress Management: The ability to keep functioning effectively when under pressure and
maintain self control in the face of hostility or provocation.
30. Personal Credibility: Demonstrated concern that one be perceived as responsible, reliable,
and trustworthy.
31. Flexibility: Openness to different and new ways of doing things; willingness to modify one's
preferred way of doing things.
Reprinted with permission from "The Value-Added Employee," by Edward J. Cripe and Richard S. Mansfield,
Copyright 2002 by Butterworth-Heinermann.

HR/IR Questions, useful for Interview preparations...

1. In HR parlance, who are 'Whistle-Blowers'?
Answer : Individuals who report unethical practices by their employers to outsiders.

2. Expand MPS, a scale used to measure the overall potential of workers' intrinsic motivation and used in the Job Diagnostic Survey developed by Richard Hackman and Greg Oldham?
Answer : Motivating Potential Score

3. How do we better know the employment agencies and executive recruiters who locate suitable candidates?
Answer : Head hunters

4. What's the term used to describe an employee who is not tied to one country or company but moves around?
Answer : Mobile worker

5. Name the Process of Certifying the competence of a person, an employee, in an area of capability?
Answer : Accredition

6. What are "Blind Ads" in HR parlance?
Answer : Recruitment advertisements that do not have the name or identity of the employer.

7. Boulwarism is a popular negotiation strategy. Who developed this concept?
Answer : General Electric Company

8. We all familiar with Buyback of shares. But while managing people what is 'Buyback'?
Answer : Buying back of a personnel, who attempts to resign, with an offer of increase in salary or wages and/or other benefits.

9. Who proposed the 'Equity Theory' in the year 1960?
Answer :  J Stacy Adams

10. What are 'Cafetaria Benefit Programs'?
Answer : Flexible benefits that allow employees to select the frings benefits and services that satisfy their needs.

11. ASA Framework was developed by Ben Schneider, a researcher from University of Maryland, and used in selection of personalities. What does ASA stand for?
Answer : Attraction - Selection - Attrition

12. What is known as the relationship between what a worker gets from the job and what he contributes to the job according to the Equity Theory?
Answer : Outcome/Input Ratio

13. In Clayton Alderfer's ERG Theory, R stands for Relatedness and G for Growth then what does E mean?
Answer : Existence

14. Employees hired or contracted by organisations on a temporary basis to fulfill the needs of the labor for a specific period are known as what?
Answer : Contingent Workers

15. What is the tendency of the personnel to experience and express their negative emotional attitude and generally perceive themselves and others surrounding them negatively called?
Answer : Neuroticism

16. Who introduced the modern concept of 360 Degree Appraisal?
Answer : General Electric Company

17. What is a 'Career Plateau'?
Answer : A chance of obtaining a promotion or a position with more responsibility is small.

18. Which internationally acclaimed Indian movie has been included as a case study for 'Human Behavior at Work' by Indian Institute of Management, Indore?
Answer : Lagaan

19. Elton Mayo, one of the pioneers in human behavior studies, called the assumptions of McGregor as "Rabble Hypothesis". What are they?
Answer : Theory X and Theory Y

20. Who is known as the "Father of 401k"?
Answer : Ted Benna

21. What is MBGO and who proposed it?
Answer : Management By Group Objectives by Likert and Fisher

22. Richard Beckhard developed a concept known as 'Beckhard's Confrontation Meeting'. What is the concept?
Answer : One day meeting of entire management of an organisation in which they take the reading of their original health

23. Name the personality who introduced the concept of 'Bureaucracy' in 1922?
Answer : Max Weber

24. Name the title of the book in which Douglas McGregor described his famous Theory X and Theory Y?
Answer : The Humanside of Enterprise

25. We all are familiar with the concept ESOP, thanks to the IT revolution. But in HR what is ETOP?
Answer : Environmental Threat and Opportunity Profile

26. In McKinsey's 7S Framework there are four 'soft variables', Staff, Skills, Style and Shared Values. What are the other three 'hard variables'?
Answer : Strategy, Structure and System

27. Fill in the blank. In Expectancy theory Force = ________ x Expectancy?
Answer : Valency

28. What is known as 'Great man Theory'?
Answer : Leaders are born and not made

29. Who proposed the "Surplus Value Theory of Wages". The theory states the labor was an article of commerce, which could be purchased on payment of 'Subsistance Theory'?
Answer : Karl Marx

30. Where is the famous 'Western Career Fair' take place annualy
Answer : Silicon Valley

31. Which theory is commonly referred as the 'Hierarchy of Human Needs'?
Answer : Maslow Theory

32. Joseph Luft and Harry Ingham developed a framework to improve the effectiveness of communication. Name it?
Answer : JOHARI Window

33. Name the person who called for the scientific selection of workers and 'Harmonious Cooperation' between labour and management?
Answer : Henry L. Gantt

34. Where did Elton Mayo and F.J.Roethlisberger conduct their famous studies which dealt the influence of work groups on performance?
Answer : Hawthorne Plant at Western Electric Company

35. In HR parlance what is known as an 'Agency Shop'?
Answer : The union where employees do not have to join but they must pay union dues to keep their jobs alive

36. Who is known as 'The father of Social Systems Approach' to organisation and management?
Answer : Vilfredo Pareto

37. The degree to which a person prefers doing two or more things simultaneously is known as what?
Answer : Polychronic

38. Name the creativity-simulation technique which tries to make the strange familiar and the familiar strange?
Answer : Synectics

39. An illegal strike called by employees who refuse to work during the term of a binding contract is known as 'Wildcat Strike'. State True or False?
Answer : True

40. What does 'Theory X' and 'Theory Y' argue?
Answer : View of Human Nature and Motivation

41. The degree to which people are willing to take chances is known as what?
Answer : Risk Propensity

42. What does 'Peter Principle' state?
Answer : In a hierarchy, people tend to rise to their level of incompetence

43. In Change management or general HR parlance what are Psychic Costs?
Answer : Stress, Strain and Anxieties that affect the inner self of a person during a period of change

44. Which term is used to describe the use of a person's cultural reference points to evaluate others?
Answer : Ethnocentrism

45. This term is derived from the typographer's word for a painting plate made from the previously composed type. Walter Lippman applied this word to perception in 1922. Since then it has became a term frequently used for perceptual errors. What is it?
Answer : Stereotype

46. Who is widely recognised as the pioneer in Cognitive Theory?
Answer : Edward Tolman

47. In an organisation if your feedback is like PIGS, what does it denotify?
Answer : Positive, Immediate, Graphic, Specific

48. What is the systematic study of cause and effect of personal space requirements called?
Answer : Proxemics

49. Expand COBRA?
Answer : Consolidated Omnibus Budget Reconicliation Act

50. Name the effect of successes made by unions at the negotiating bench influencing the wages, working conditions and other terms of employment benefits for workers who are not yet the members of unions?
Answer : Spillover Effect

One mind blowing interview


Interviewer : Tell me about yourself.
Candidate: I am Rameshwar Kulkarni. I did my Tele Communication engineering from BabanRao Dhole-Patil Inst it ute of Technology.

Interviewer : BabanRao Dhole-Patil Inst it ute of Technology? I had never heard of this college before!
Candidate : Great! Even I had not heard of it before getting an admission into it ..
What happened is – due to cricket world cup I scored badly! in 12th.I was getting a paid seat in a good college. But my father said (I prefer to call him ‘baap’) – “I can not invest so much of money”.(The baap actually said – “I will never waste so much of money on you”). So I had to join this college. Frankly speaking this name – BabanRao Dhole-Patil, can at the most be related to a Shetakari Mahavidyalaya

Interviewer: ok, ok. It seems you have taken 6 years to complete your engineering.
Candidate : Actually I tried my best to finish it in 4 years. But you know, these cricket matches and football world cup, and tennis tournaments. It is difficult to concentrate. So I flunked in 2nd and 3rd year. So in all I took 4 + 2 = 7 years.

Interviewer: But 4+2 is 6.
Candidate: Oh, is it ? You know I always had KT in maths. But I will try to keep this in mind. 4+2 is 6, good, thanks. These cricket matches really affect exams a lot.. I think they should ban it .

Interviewer : Good to know that you want cricket matches to be banned.
Candidate : No, no… I am talking about Exams!!

Interviewer: Ok, What is your biggest achievement in life?
Candidate : Obviously, completing my Engineering. My mom never thought I would complete it . In fact, when I flunked in 3rd year, she was looking for a job for me in BEST (Bus
corporation in Maharashtra ) through some relative.

Interviewer : Do you have any plans of higher study?
Candidate: he he he.. Are you kidding? Completing ‘lower’ education it self was so much of pain!!

Interviewer : Let’s talk about technical stuff. On which platforms have you worked?
Candidate : Well, I work at SEEPZ, so you can say Andheri is my current platforms. Earlier I was at Vashi center. So Vashi was my platform then. As you can see I have experience of different platforms! (Vashi and Andheri are the places in Mumbai)

Interviewer : And which languages have you used?
Candidate : Marathi, Hindi, English. By the way, I can keep quiet in German, French, Russian and many other languages.

Interviewer: Why VC is better than VB?
Candidate : It is a common sense – C comes after B. So VC is a higher version than VB. I heard very soon they are coming up w it h a new language VD!

Interviewer: Do you know anything about Assembly Language?
Candidate: Well, I have not heard of it . But I guess, this is the language our ministers and MPs use in assembly.

Interviewer : What is your general project experience?
Candidate : My general experience about projects is – most of the times they are in pipeline!

Interviewer: Can you tell me about your current job?
Candidate: Sure, Currently I am working for Bata Info Tech ltd. Since joining BIL, I am on Bench. Before joining BIL, I used to think that Bench was another software like Windows.

Interviewer : Do you have any project management experience?
Candidate: No, but I guess it shouldn’t be difficult. I know Word and Excel. I can talk a lot. I know how to dial for International phone call and use speaker facility. And very important – I know few words like – ‘Showstoppers ‘ , ‘hot fixes’, ‘SEI-CMM’, ‘quality’, ‘version control’, ‘deadlines’ , ‘Customer Satisfaction’ etc. Also I can blame others for my mistakes!

Interviewer: What are your expectations from our company?
Candidate : Not much.
1. I should at least get 40,000 in hand..
2. I would like to work on a live EJB project. But it should not have deadlines. I personally feel that pressure affects natural talent.
3. I believe in flexi-timings.
4. Dress Code is against basic freedom, so I would like to wear t-shirt and jeans.
5. We must have sat-sun off. I will suggest Wednesday off also, so as to avoid breakdown due to overwork.
6. I would like to go abroad 3 times a year on short term preferably 1-2 months) assignments. Personally I prefer US, Australia and Europe. But considering the fact that there are Olympics coming up in China in the current year, I don’t mind going there in that period. As you can see I am modest and don’t have many expectations. So can I assume my selection?

Interviewer : he he he ha ha ha. Thanks for your interest in our
organization. In fact I was never entertained so much before. Welcome to INFOSYS.

The fellow was appointed in a newly created section ‘Stress Management’ in the HRD of Infosys.

Contract employee v/s permanent employee

Who Is a Contract Employee?
A contract employee is an individual engaged by a business to provide a specific set of services. An employer-employee relationship is established pursuant to the terms and conditions of a written employment contract. The contract delineates the length of employment, the salary and bonuses (if any) to be paid, and the other benefits that accrue to the contract employee. The contract also sets forth the specific role the employee will play. Contract employees frequently are engaged for the pursuit of a particular project.
Job satisfaction is reliant upon different factors for different people. In the first instance, it might appear as though establishing yourself within a company, forming close working relationships with colleagues and receiving promotional opportunities as part of your career progression are more readily achievable as a permanent employee. However, all of these things can be accomplished as a contractor, and your career progression could be hindered if such factors are preventing you from considering a move into contract work.
The decision to go contract can be a difficult one unless you have an adequate understanding of how it can work to your advantage, so it is important that you consider the potential benefits of this type of employment in order to avoid inadvertently closing the door to opportunities that could take your career to new levels.

Contracting may be for you if you relate to these points:
•You want the choice to be selective of those you work with and work according to your preference.
•You love variety in your life, one job for life or even say 10 years working for the same employer is an idea you do not endorse.
•You are your own boss; the independence to manage your time is the major lure for working on contract as popped to being a permanent employee.
•You are a fast learner and know how to implement your ideas independently. The learning curve is also very high when working independently; you learn marketing sales and finance management all at the same time

Benefits of contract emp. for the employee -
Independent contractors make their own hours; decide when to work and who to work for. They do not depend on the success of a single business to produce Income and meet their financial responsibilities. According to the Wall Street Journal, independent contractors earn up to 40 percent more per hour than Permanent employees. Contractors do not receive benefits from clients; The higher pay is meant to make up for this. Rather than having taxes taken out Each pay period, independent contractors pay quarterly taxes, allowing them to hold onto their cash longer.
Many people may also be reluctant to opt for contract work due to concern that it will hinder their chances of gaining Charter ship. However, a large proportion of employers will offer opportunities to experience a variety of job roles and responsibilities to help contractors working with them in achieving chartered status. By working as a contractor, you can experience a wide variety of environments, acquiring a range of transferable skills that can work to your advantage as you develop your career. These skills are also likely to be gained faster in a contract position than in a permanent post and, as well as expanding your knowledge, they can make you a more desirable recruitment option and increase your chances of future employment and assignment opportunities.



The amount of control you have over factors such as when to work, where to work, who to work for and a contract length to suit you, is substantially increased with contract work. Permanent employees are usually subjected to greater restrictions than contractors, which can strongly influence the decision to take on a contract assignment. Contracting also provides an excellent opportunity to meet new people, not only socially, but also as a fantastic networking opportunity. By forming relationships with the people you meet working on different projects; you can keep up to date with new developments as well as the challenges faced by your industry. These new relationships can also provide important links to future career opportunities. Project managers regularly have tight deadlines that they work to, so are therefore generally more concerned about employing contractors with the right skill set that will successfully work within a specified timeframe than they are about getting a cheaper candidate who might not be as efficient. This can result in contractors being paid a premium for their services. Under normal circumstances contractors are not tied to the same period of notice as permanent staff either, which gives them more freedom to move around quickly and easily. As a week’s notice is not unusual for contractors; it can be easy to change jobs as soon as new opportunities arise. Contractors have the added advantage of choosing when they work, so can enjoy longer holidays than their permanent counterparts. It is not uncommon for contractors to take holidays of up to six weeks after an assignment has been completed. Being paid on an hourly basis also means that paid overtime is available for contractors, whereas permanent employees do not always have this option. As a contractor, it is important that you work through a reputable agency, as they are able to offer good relationship management, as well as discounted PI and PL insurances, free careers advice, ongoing rate negotiation and updates about the latest market trends.

A contract employee typically works for one or several organizations on a project or temporary basis. Many employers hire contract employees to supplement their staff for a variety of reasons.

Flexibility - Because businesses often hire contractors for temporary projects, they offer some flexibility with work schedules and locations. Many contractors work from home, and visit their clients periodically to report their progress.
Higher Wages - Because a contractor is not an employee of an organization, benefits such as health insurance and paid vacation is not offered. Employers may pay higher hourly wages to contractors because they have no additional costs and the commitment is short-term.

Commitment - A contractor is not committed to an employer after the assignment or project is completed, and can find one or several other opportunities while working on an assigned project.

New Skills - Because contractors often work in different organizations and industries, they often learn new skills as part of the project, which can enhance their resume.

3R of Employee Retention

3R of Employee Retention

How do you retain employee in an organization?

To keep them satisfied enough to let them believe that their needs will be better met at your organization than anywhere else.

Sound straightforward & simple.

But, how do you start & from where do you start?

There are plenty of challenges:

• Today’s employees—especially younger ones—think more like “free agents,” selling their services to the highest bidder and ever willing to entertain other offers.
• Many employees today get calls from “headhunters” several times a month.
• In many organizations, losing employees has a domino effect. When one employee leaves, others often wonder about opportunities elsewhere.

For the same reason, there has been a sea change in the way organization has been treating employees.

To retain the employees, keep satisfaction high, you need to implement each of the 3 Rs of employee retention: respect, recognition, and rewards.

Respect: It is the foundation of keeping employees. It involves esteem, special regard, or particular consideration given to people. Recognition & Rewards will have little effect if you don’t respect employees.

Recognition: It is defined as “special notice or attention” and “the act of perceiving clearly.” Many problems with retention and morale occur because management is not paying attention to people’s needs and reactions.

Rewards: These are the extra perks you offer beyond the basics of respect and recognition that make it worth people’s while to work hard, to care, to go beyond the call of duty. While rewards represent the smallest portion of the retention equation, they are still an important one.

While implementing the “3 R”, it should be noted that respect should be the largest component of your effort. Without it, recognition & rewards will prove hollow.

                       

                                                                                              courtesy- Ritesh..

Why shud we do an Internship..

This year's graduates who completed an internship as part of their degree were 26% more likely to get a job than their peers who did not, according to the latest research from the Graduate Management Admissions Council (GMAC), which administers the GMAT test.
The data comes from a survey of both MBA and specialised masters graduates - the GMAC Global Management Education Graduate Survey.


"The value of an internship can't be underestimated -for both the employer and the employee," says Michelle Sparkman-Renz, director of research communications at GMAC. "Whether or not a candidate has work experience, internships are effective in helping students realise their career ambitions.
And in a hyper-competitive job market, an internship is a great way for a student to shine and get their résumé put on the top of the pile when applying for a full-time job at the company."
According to data from the 2011 GMAC Corporate Recruiters Survey, internships are one of the best ways for job candidates to prove themselves in their targeted industry. Indeed, the employment of interns as full-time hires was notable in both the consulting and high tech sectors, with a 70% rate of hire for interns.
More than 40% of MBA and specialised master's graduates who participated in the GMAC graduate survey said they completed an internship while in school.

All about fringe benefits..

TYPES OF FRINGE BENEFITS

Organizations provide a variety of fringe benefits. The fringe benefits are classified under four heads as given here under:

1.For Employment Security :
Benefits under this head include unemployment, insurance, technological adjustment pay, leave travel pay, overtime pay, level for negotiation, leave for maternity, leave for grievances, holidays, cost of living bonus, call-back pay, lay-off, retiring rooms, jobs to the sons/daughters of the employees and the like.

2.For Health Protection:
Benefits under this head include accident insurance, disability insurance, health insurance, hospitalization, life insurance, medical care, sick benefits, sick leave, etc.

3.For Old Age and Retirement:
Benefits under this category include: deferred income plans, pension, gratuity, provident fund, old age assistance, old age counseling , medical benefits for retired employees, traveling concession to retired employees, jobs to sons/daughters of the deceased employee and the like.

4.For Personnel Identification, Participation and Stimulation:
This category covers the following benefits: anniversary awards, attendance bonus, canteen, cooperative credit societies, educational facilities, beauty parlor services, housing, income tax aid, counseling, quality bonus, recreational programs, stress counseling, safety measures etc.

The fringe benefits are categorized as follows:

a)Payment for Time Not worked: Benefits under this category include: sick leave with pay, vacation pay, paid rest and relief time, paid lunch periods, grievance time, bargaining time, travel time etc.

b)Extra Pay for time Worked: This category covers the benefits such as: premium pay, incentive bonus, shift premium, old age insurance, profit sharing, unemployment compensation, Christmas bonus, Deewali or Pooja bonus, food cost subsidy, housing subsidy, recreation.

Employee Security

Physical and job security to the employee should also be provided with a view to promoting security to the employee and his family members. The benefit of confirmation of the employee on the job creates a sense of job security. Further a minimum and continuous wage or salary gives a sense of security to the life.

Retrenchment Compensation:

The Industrial Disputes Act, 1947 provides for the payment of compensation in case of lay-off and retrenchment. The non-seasonal industrial establishments employing 50 or more workers have to give one month’s notice or one month’s wages to all the workers who are retrenched after one year’s continuous service. The compensation is paid at the rate of 15 days wage for every completed year of service with a maximum of 45 days wage in a year. Workers are eligible for compensation as stated above even in case of closing down of undertakings.

Lay-off Compensation:

In case of lay-off, employees are entitled to lay-off compensation at the rate to 50% of the total of the basic wage and dearness allowance for the period of their lay-off except for weekly holidays. Lay-off compensation can normally be paid up to 45 days in a year.

Safety and Health

Employee’s safety and health should be taken care of in order to protect the employee against accidents, unhealthy working conditions and to protect worker’s capacity. In India, the Factories Act, 1948, stipulated certain requirements regarding working conditions with a view to provide safe working environment. These provisions relate to cleanliness, disposal of waste and effluents, ventilation and temperature, dust and fume, artificial humidification, over-crowding, lighting, drinking water, latrine urinals, and spittoons. Provisions relating to safety measures include fencing of machinery, work on or near machinery in motion, employment of young persons on dangerous machines, striking gear and devices for cutting off power, self-acting machines, easing of new machinery, probation of employment of women and children near cotton openers, hoists and lifts, lifting machines, chains ropes and lifting tackles, revolving machinery, pressure plant, floors, excessive weights, protection of eyes, precautions against dangerous fumes, explosive or inflammable dust, gas etc. Precautions in case of fire, power to require specifications of defective parts of test of stability, safety of buildings and machinery etc.

OBJECTIVES OF FRINGE BENEFITS

The view point of employers is that fringe benefits form an important part of employee incentives to obtain their loyalty and retaining them. The important objectives of fringe benefits are:

1.To create and improve sound industrial relations

2.To boost up employee morale.

3.To motivate the employees by identifying and satisfying their unsatisfied needs.

4.To provide qualitative work environment and work life.

5.To provide security to the employees against social risks like old age benefits and maternity benefits.

6.To protect the health of the employees and to provide safety to the employees against accidents.

7.To promote employee’s welfare by providing welfare measures like recreation facilities.

8.To create a sense of belongingness among employees and to retain them. Hence, fringe benefits are called golden hand-cuffs.

9.To meet requirements of various legislations relating to fringe benefits.

Need for Extending Benefits to Employees

(i)Rising prices and cost of living has brought about incessant demand for provision of extra benefit to the employees.

(ii)Employers too have found that fringe benefits present attractive areas of negotiation when large wage and salary increases are not feasible.

(iii)As organizations have developed ore elaborate fringe benefits programs for their employees, greater pressure has been placed upon competing organizations to match these benefits in order to attract and keep employees.

(iv)Recognition that fringe benefits are non-taxable rewards has been major stimulus to their expansion.

(v)Rapid industrialization, increasingly heavy urbanization and the growth of a capitalistic economy have made it difficult for most employees to protect themselves against the adverse impact of these developments. Since it was workers who are responsible for production, it was held that employers should accept responsibility for meeting some of the needs of their employees. As a result, some benefits-and-services programs were adopted by employers

(vi)The growing volume of labor legislation, particularly social security legislation, made it imperative for employers to share equally with their employees the cost of old age, survivor and disability benefits.

(vii)The growth and strength of trade unions has substantially influenced the growth of company benefits and services.

(viii)Labor scarcity and competition for qualified personnel has led to the initiation, evolution and implementation of a number of compensation plans.

(ix)The management has increasingly realized its responsibility towards its employees and has come to the conclusion that the benefits of increase in productivity resulting from increasing industrialization should go, at least partly, to the employees who are responsible for it, so that they may be protected against the insecurity arising from unemployment, sickness, injury and old age. Company benefits-and-services programs are among some of the mechanisms which managers use to supply this security.

FLEXIBLE BENEFITS

What are Flexible Benefits?

Flexible benefits allows allow employees to pick benefits that most their needs. The idea is to allow each employee to choose a benefit package that is individually tailored to his or her own needs and situation. It replaces the traditional “one-benefit-plan-fits-all” programs that dominated organizations for more than 50 years.

The average organization provides fringe benefits worth approximately 40% of an employee’s salary. Traditional benefit programs were designed for the typical employees of the 1950s—- a male with wife and two children at home. Less than 10% of employees now fit this stereotype. While 25% of today’s employees are single, a third are part of two-income families with no children. As such these traditional programs don’t tend to meet the needs of today’s more diverse workforce. Flexible benefits, however, do meet these diverse needs. They can be uniquely tailored to reflect differences in employee needs based on age, marital status, spouses’ benefit status, number and age of dependents, and the like.

The three most popular type of benefit plans are modular plans, core-plus options, and flexible spending accounts. Modular plans are pre-designed packages of benefits, with each module put together to meet the needs of a specific group of employees. So a module designed for single employees with no dependents might include only essential benefits. Another, designed for single parents, might have additional life insurance, disability insurance, and expanded health coverage.

Core-plus plans consist of a core of essential benefits and a menu-like selection of other benefits options from which employees can select and add to the core. Typically, each employee is given “benefit credits,” which allow the “purchase” of additional benefits that uniquely meet his or her needs. Flexible spending plans allow employees to set aside up to the dollar amount offered in the plan to pay for particular services. It’s a convenient way, for example, for employees to pay for health-care and dental premiums. Flexible spending accounts can increase employee take-home pay because employees don’t have to pay taxes on the dollars they spend out of these accounts.

Linking Flexible Benefits and Expectancy Theory:

Giving all employees the same benefits assumed that all employees have the same needs. Of course we know that assumption is false. Thus, flexible benefits turn the benefit expenditure into a motivator.

Consistent with expectancy theory’s thesis that organizational rewards should be linked to each individual employees goals, flexible benefits individualized rewards by allowing each employ to choose the compensation package that best satisfies his or her current needs.

Flexible Benefits in Practice

Today almost all major Corporations in the United States offer Flexible benefits. And they are becoming a norm in other countries too. For instances a recent survey of 136 Canadian Organizations found that 93% have adopted flexible benefits or will in the near term. And a similar survey of 307 firms in the United Kingdom found that while only 16% have flexible benefits programs in place, another 60% are either in the process of implementing them or are seriously considering them.

In India and most countries of Asia with the exception of Japan Flexible benefits are not offered by employers for various reasons which may create personnel and trade union problems.. In India some flexible benefits are offered in a limited way to the top management personnel like Executive Directors, President, Vice President, General Manager etc., It may take a few more years to offer flexible benefits to employees in India and other Asian counties by the managements.

401k Compensation system

There are two main types of employer-sponsored retirement plans: defined benefit and defined contribution. A defined benefit plan, such as a traditional pension plan, sets the amount that the employer will pay to workers upon their retirement. In defined contribution plans, the plan sets the amount of the contributions that an employer makes, not the benefit it will pay at retirement. In 1978, section 401(k)of the Internal Revenue Code authorized a new kind of defined contribution plan that allows the employee to make pre-tax contributions to the plan.

In a 401(k) plan, the employer sets up a special savings and investment account with an investment company, a bank trust dept, or an insurance company. The employee agrees to put part of his or her salary into the plan through automatic deductions each pay period. This money is deducted before the employee’s paycheck is taxed, so that it remains untaxed until it is taken out of the plan, often years or even decades later.

Employers frequently match employee contributions up to a certain level, sometimes by as much as 100 percent, but are not required to do so. The money in the plan is invested into one or more funds provided in the plan according to choices made by the employee. The plans usually are intended to earn money over a very long period of time, which is much less risky than short-term investing..

Employees like 401(k) plans for several reasons. The tax deferral an obvious plus. Others popular features include the increased portability of this plan from one employer to another, the matching contributions, and the sense of control due to the ability to choose one’s own investments.