A Report 2

A Report

On

Compensation Structure

Of Maruti Suzuki Ltd.

Submitted to:

Col. Warrier

Submitted By:

Group 09,

PGDM - HR (2010 – 2012)

Maruti Suzuki Ltd. Compensation Structure– A Report

Members of Group 09:

Student Roll No

Suchi Shukla 09

Snehal Aher 19

Ankit Khare 29

Anamika Tiwari 39

Anupama Singh 49

Mitali Shrivastava 59

©Maruti Suzuki Ltd. Compensation Structure – Group 09 (PGDM –HR, 2012) ITM Kharghar Page 2 of 23


Table of Contents:

Particulars Page No.

About the Company History Rewards and Recognition

4

HR strategy 8

Organizational Structure 12

Rationale for Compensation 15

Compensation Structure 17

Strengths and Weakness in Compensation Structure 21

Recommendations 21

References 23



Maruti Suzuki Ltd. :



About the company:

Maruti Suzuki India Limited (MSIL, formerly known as Maruti Udyog Limited) is a subsidiary of Suzuki Motor Corporation, Japan.

MSIL has been the leader of the Indian car market for over two and a half decades. The company has two manufacturing facilities located at Gurgaon and Manesar, south of

New Delhi, India. Both the facilities have a combined capability to produce over a 1.2 million (1,200,000) passenger car units annually.

The company offers a wide range of cars across different segments. It offers 14 brands and over 150 variants - Maruti 800, people movers, Omni and Eeco, international brands Alto, Alto-K10, A-star, WagonR, Swift, Ritz and Estilo, off-roader Gypsy, SUV Grand Vitara, sedans SX4 and Swift DZire In an environment friendly initiative, in August 2010 Maruti Suzuki introduced factory fitted CNG option on 5 models across vehicle segments. These include Eeco, Alto, Estilo, Wagon R and Sx4.

In fiscal 2009-10 Maruti Suzuki became the only Indian company to manufacture and sell One Million cars in a year.

Maruti Suzuki has employee strength over 7,600 (as at end March 2010), In 2009-10, the company sold a record 10,18,365 vehicles including 1,47,575 units of

exports. With this, at the end of March 2010, Maruti Suzuki had a market share of 53.3 per cent of

the Indian passenger car market (including C segment). The company has a sales network of 802 centers in 555 towns and cities, and provides

service support to customers at 2,740 workshops in over 1,335 towns and cities (as on March 31, 2010). The company is focused on rapidly expanding the sales and service further across the country.

Recent awards:

The Company won the following awards/recognition during the year 2009-2010: A-star has been rated as No.1 environment friendly small car by Germany's prestigious VCD

environmentalcar rating.

‘Manufacturer of the year' award by CNBC overdrive. Ritz has been awarded as the 'hatchback car of the year' by auto car UTVi and 'car of the

year' by BusinessStandard Motoring.

'National award for excellence in corporate governance' by Institute of Company Secretaries of India.

'CII-ITC sustainability award 2009' for strong commitment to 'sustainability'. ‘Golden peacock award' for environmental initiatives. Gurgaon plant has been awarded the 'gold award' by Economic Times India Manufacturing

Excellence Award (IMEA).



History of the company:

Over the quarter century of its existence, Maruti Suzuki's contribution as the growth engine for the Indian automobile industry is widely acknowledged. Maruti Suzuki has impacted the lifestyle and psyche of an entire generation of Indian middle class through the quality of its products and services that are in direct sync with the needs of the Indian populace.

1970 A private limited company named 'Maruti technical services private limited' (MTSPL) launched on November 16, 1970. The stated purpose of this company was to provide technical know-how for the design, manufacture and assembly of "a wholly indigenous motor car".

1981 The Indian Central government at the behest of Indira Gandhi salvages Maruti limited and starts looking for an active collaborator for this company.

Maruti Udyog Ltd was incorporated under the provisions of the Indian Companies Act, 1956

1982 License and Joint Venture Agreement(JVA) signed between Maruti Udyog Ltd. and SMC of Japan

1983 Maruti 800, a 796 cc hatchback, India’s first affordable car, is released in the market

1984 Installed capacity of the plant in Gurgaon, reaches 40,000 units

1992 Suzuki increases its stake in Maruti to 50 percent, making the company a 50-50 JV with the Government of India the other stake holder.

2000 Suzuki Motor Corporation (SMC) increases its stake in Maruti to 54.2 percent



2003 Maruti Udyog Ltd is Listed on BSE and NSE after a public issue, which is oversubscribed 10 times

2004 Maruti Udyog closed the financial year 2003-04 with an annual sale of 472122 units, the highest ever since the company began operations 20 years ago

2007 o Maruti Udyog limited becomes Maruti Suzuki ltd

2008 o Completes 25 Years of existence

2010 o Establishes New plant at Manesar



HR strategy



1. Employee development:

The Company has always focused on employees' development. A total of 46200 man-days of

training were conducted for employees across all levels during the year.

The training programmes vary according to the need of the employees at various levels.

Based on the behavioral traits, some of the trainings introduced in 2009-10 were 'changing

mindset-changing lives'; 'being the best'; 'emotional intelligence'; 'planning organizing

problem solving'; 'assertiveness & self confidence'; and 'conflict management'.

Some of the trainings based on technical needs include 'market research'; 'capital

budgeting'; 'risk management & hedging'; 'unigraphics'; 'business simulation games';

'inhouse quiz'; 'cost management'; 'taxation'; 'motion & time study'; 'design failure mode

effect analysis' and 'geometric designing & tolerancing'.

Training for leader ship traits include 'departmental heads convention'; 'divisional head

training' and 'director re-treat'.

The Company also has higher education schemes for its employees.

2) Succession Planning:

A companywide succession planning exercise was undertaken for key roles to ensure

the leadership pipeline stays full and business continuity is assured.

Building engineering capability has been identified as a key strategic imperative.

Substantial steps were taken to create a large talent pool of young engineers with a

clearly defined skill building process within Maruti and Suzuki, Japan.

The company also went to the USA, Europe and Japan for global hiring of

engineering talent for imparting their knowledge to the younger engineers and for

specific competencies.

In depth thought was given to training needs at all levels and functions.



3) Employee Engagement:

The Company has, over a period of time, inculcated an environment of exceptional

employee engagement, ownership, motivation and pride.

The people in the Company take the growth of the Company as a means of their

own advancement and believe in team spirit and collective progress.

This environment is a result of principles of equality, objectivity and openness,

examples set by top leadership, a fair, transparent and interactive performance

assessment and recognition system and a culture of appreciation.

The Company encourages people to look out for facts and do root cause analysis

with depth and rigor.

The Company has since inception followed practices like an open office, a common

canteen for all levels, common uniform all of which encourage openness and

honesty.

Similarly the Company insists on 3G a Japanese principle meaning go to the spot, see

the problem for yourself, take countermeasure then and there.

This is actually a measure to encourage people to stay in touch with reality. Internal

communication is driven both culturally and through organized and structured tools

to facilitate flow of this wisdom.

The Company believes that this is the foundation of superior business performance

and is strong enough to create unprecedented results in market share, customer

satisfaction and financials.

4) Appraisal:

The Company is adopting initiatives like 360 degree feedback for middle

management, tea group meetings with MD and top management and Stay-Interview

to take this openness to a still higher level.

This translates to better speed, responsiveness, commitment and people excellence.

The Company keeps realigning the organization structure with environment and

business needs.



5) HR Organization:

The HR organization in the Company split itself to have dedicated HR departments

for functions like R&D, Marketing and Production.

These departments are located in the offices of their respective functions and have

dual reporting to the HR head and to the functional heads.

The result is each function gets customized HR support in terms of policy and

training interventions.

The Company believes, as in its own case, the scalability and growth of component manufacturers

will happen only if they place people first.



Organizational Structure



The Company has a multi-tier management structure, comprising the board of directors at

the top and followed by managing executive officers, divisional heads and departmental

heads.

Through this, it is ensured that: Strategic supervision is provided by the board; Control and

implementation of Company's strategy is achieved effectively.

Board of directors:

As on 31st March 2010, the Company's board of directors consists of eleven members.

The chairman of the board is a non-executive director.

The Company has an optimum combination of executive and non-executive directors in

accordance with the provisions of clause 49 of the listing agreement.

The board is made up of four executive directors and seven non-executive directors, of

whom four are independent; no director is related to any other director.

All independent directors are persons of eminence and bring a wide range of expertise and

experience to the board thereby ensuring best interest of stakeholders and the Company.



Various levels in organizational structure:


Associates(TT, Jr. Associate, Associate, Sr. Associate)

Middle Mgmt. – II (FM/ DPM)

Middle Mgmt.- I (Mgr.- L13/ Sr. Mgr- L14)

Junior Mgmt. (GET, ET, Asst. Mgr.- L11/ Dy. Mgr.- L12)

Supervisors(DET, Jr. Eng./Exe., Eng../Exe., Sr. Eng/Exe.)

Sr. Mgmt. (SFM1/DDVM/ SFM2/ DVM)

Top Mgmt. (MEO/EO)

Job Role 1

Job Role 5

Job Role 6

Job Role 7

Job Role 3

Job Role 4

Job Role 2


Rationale for Compensation



The basic compensation structure of the employees have been designed based on several factors such as

o labour market conditions,o company’s paying capacity o and legal provisions.

The pay structure in Maruti can be examined broadly under the following heads:

Basic Wage :The basic wage in India corresponds with what has been recommended by the Fair Wages Committee (1948) and the 15th Indian Labor Conference (1957).The following criterion may be considered while deciding the basic wage:

o Skill needs of the job.o Experience needed.o Difficulty of work: mental as well as physical.o Training needed. o Responsibilities involved.o Hazardous nature of job.

Bonus: An important component of employees’ earnings, besides salary, is bonus. According to The Payment of Bonus Act, 1965 an employee who earns more than Rs.2500 p.m. basic plus DA is eligible for bonus. The minimum bonus to be paid has been raised to 8.33% w.e.f 25.9.75.

The additional perks & benefits are as per level & position of the individual. This has been determined keeping in view the market trends and to attract, retain & motivate employees.



Compensation structure



Senior Management Remuneration:

Whole Time / Executive Directors:

Performance criteria for payment of performance linked bonus :

a. Actual achievement in terms of growth in sales, profit, etc. as compared to the previous year

b. Actual achievement of growth as compared to the budget approved at the beginning of the year

c. Growth of market share of Company's products as compared to key competitors in the industry


Senior Management

Executive Directors Non Executive Directors


Allowances:

• Accommodation (furnished/unfurnished) or house rent allowance

• House maintenance allowance

• Reimbursement of expenses or allowance for household utilities

• Medical reimbursement, accident insurance

• LTC for self & family

• Club fees

• Maximum limit of upto Rs.40,00,000 per annum

Non –Executive Directors:

Payment of remuneration by way of commission at a sum not exceeding 1% of the net profits of the Company subject to a ceiling of Rs.10 million per annum. The criteria for the commission is:

1. Attendance at the board/ board level committee meetings

2. Time devoted

3. Current trends prevailing in the industry

4. Sitting fees



Supervisory level:

Level

HEAD DESCRIPTION MONTHLY ANNUAL Distribution

Basic Pay 15,500 186,000 33% of ATR

Housing (HRA / Lease) 9,000 108,000 Fixed Amt

Uniform Maint. Allow. 1,000 12,000 Fixed Amt

Medical Domicillary 1,250 15,000 Fixed Amt

LTA 1,292 15,500 One mth Basic Pay

Child Education Allow. 200 2,400 Fixed Amt

Conveyance Reimb. 2,000 24,000 Fixed Amt

Special Allowance 9,428 113,138 Balancing Amt

Sub Total - I 39,670 476,038

Performance Pay 56,500 10% of ATR

Sub Total - I I 39,670 532,538

Provident Fund 1,860 22,320 12% of Basic Pay

Gratuity 745 8,942 4.81% of Basic Pay

Superannuation Fund 100 1,200 Fixed Amt

Sub Total - I II 42,375 565,000

Annual Total Remuneration 42,375 565,000

Supervisor

Reward System:

Quarter based on excellent performance on the job and also is decided by the department

heads in consultation with the HR head.

Quarterly suggestion scheme run on an organization wide basis, where cost saving

suggestions are rewarded as 1st, 2nd & 3rd prize.

Yearly basis they have a High value reward scheme where an individual is rewarded based

on his overall annual performance.

‘Collective vacation scheme’ whereby the employee enjoys an eight-day vacation starting

December 24.

Lastly, for this Maruti Suzuki is looking at a 10-15% hike, up from last year’s 8-10% so they

are planning an average bonus payout of 100% across levels.



Strengths and Weakness&

Recommendations



Strengths:

Minimum bonus of 8.33% No functional difference of pay Mix of fixed and non fixed components. Good reward system Common Structure across all functional levels.

Weakness:

No compensation committee to review market practices and to decide on remuneration packages applicable to the Vice-Chairman & Managing Director, the Executive Directors and Senior Executives of the Company.

No fixed age of retirement. Retirement by rotation and reappointment.

Recommendations:

To have a compensation committee To have a fixed retirement age



References:

Mr. Karthik P.M. (HR – Dept, Maruti Suzuki Ltd. Chennai) Annual Report 2009-2010 - Maruti Suzuki India Ltd. Official Website – Maruti Suzuki Ltd. Annual Report 2009 - 2010 – Mahindra & Mahindra Annual Report 2009 - 2010 – Tata Motors


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