Five aspects of the reward system are highlighted by Cascio: (i) value of rewards; (ii) amount of rewards, (iii) time of rewards; (iv) likelihood of rewards, and (v) fairness and equity of rewards.

In the subsequent paragraphs, we discuss the direct and indirect benefits and compensation that can be offered to employ to enhance productivity.

Labour and compensation

Organisations are increasingly shedding surplus labour. They are correspondingly increasing the employment of contract labour. In an environment of divided unions and harsh business realities, the workers and management are trying to work by consensus rather than confrontation. There is a realisation of inter-dependence and mutuality of goals, and better understanding of each others' point of view.

However contract labour is vulnerable to exploitation by management and needs a reasonable level of protection under labour laws or increased compensation (Nandwani et al. 1997).

Thechallenge before India is to increase its labour market flexibility for globalisation, without imperilling workers' welfare or leading to an increase in unemployment. A report entitled `India: Economic Reforms and Labour Policies' (The Times of India, 2 September 1996) offers suggestions for determining wages for workers. Fully indexed national minimum wages for rural and urban areas linked to official poverty lines are recommended for the unorganised sector and full indexing of all wages is recommended for the organised sector.

The organised sector constitutes 8-10 per cent of the workforce and contributes 33.3 per cent of the net domestic product. Infrastructure, which includes railways, ports, airports, electricity, telecommunications, etc., and intermediate products, such as steel, iron and aluminium, are provided by the organised sector. Due to overprotective labour laws, job security, and poor performance-linked incentives, the employees of the organised sector are not very productive. Ultimately,this is to the detriment of the industry and can result in reduced overall employment.

The unorganised sector plays a supportive or ancillary role towards the organised sector. Therefore, lack of growth in the organised sector has an adversarial impact on the unorganised sector owing to poor labour policies. Similarly, the expansion of the organised sector leads to the creation of jobs in the unorganised sector. A contraction leads to increased unemployment (Agrawal 1997). Thus, an improved labour policy can lead to growth of employment in both the organised as well as unorganised sectors—which can be a major contribution to growth in the economy. An ILO study showed that 8 per cent of India's employed labour force in the organised sector and 92 per cent in the unorganised sector do not have job protection and the assurance of minimum wages. The National Sample Survey provides certain figures about employment. The total employment rose from 337.8 million in 1989-90 to 359.9 million in 1992-93. Of this,regular wage employment went up, marginally, from 46.8 million to 47.1 million, whereas casual employment accounted for the balance. Therefore, casual employment accounted for most of the increase in total employment during this period.

Vedavali (1997) points out that the Indian labour market can be viewed as investor-friendly if there is evidence that the institutionalisation in the labour market has not resulted in real wage growth exceeding productivity growth. The annual survey of industries data revealed that during the period 1980-81 to 1990-91 the real wage per employee in the organised industry grew much less than productivity, and therefore the wage fixation/revision mechanism did not militate against the employer's interest.

Bhalla (1996) states that in India the success of any restructuring effort involving the workforce has to be judged at the village level, where the majority of its population lives. The share and number of workers in the farm sector has to be brought down and shifted tonon-farm sectors that have high productivity. This requires a well-conceived rural and small town industrial development policy which covers: (i) wage contracts for a minimum period of five years; (ii) wage revision linked to productivity growth; and (iii) a bonus system linked to the profitability of the organisation.Inflation has adversely affected real wages earned by labour in India.

Although GDP growth soared above 7 per cent in 1994-95 and 1995-96, the real wages of unskilled agricultural labour declined by 0.60 per cent and 0.69 per cent respectively. Since rapid GDP growth implies higher productivity, sustained wage increases can be expected in future years. However, in the short run, inflation can more than offset the impact of GDP growth on poverty. Since India is going through a difficult period of transition, it will be necessary to keep a watch on the downward pressure on real wages.

LIBERALISATION AND HUMAN RESOURCE MANAGEMENT
Arun Monappa & Mahrukh Engineer
Published by ResponseBooks
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