Compensation Practices of DimondSoft

CA 01
Of
Compensation Management
By
PRITAM SAHA
(Reg. no: 11711515)

Suptajyoti Chirui
(Reg. no:11705459)
Md Rajon Hossain
(Reg. no: 11800676)
Sourav Kumar Panigrahi
(Reg.no: 11802152)

Under the Guidance

LOVELY PROFESSIONAL UNIVERSITY

Introduction: DiamondSoft is United State based software major company, which is in the
business of executing turnkey projects in ERP software development. The company has account
in more than 100 large conglomerates, spread across the world. A team leader manages each
client account with software developer, who are stationed at the client’s site till successful
development and implementation. Team leaders are managed by regional vice presidents, who
are stationed in the respective regions. Most of the deliberations between the team leader and
the regional vice presidents take place through videoconferences. Due to their exposer to
different areas of business, software developers can quickly acquire knowledge in wide business
domains and become a target for poaching by other competing organizations.
Software development is not an entry level job at DiamondSoft. The company deliberately
recruits management trainees who are engineers with management degrees from leading
business schools. These trainees get a yearlong induction training, which also includes three
months of full training in SAP on campus from Siemens and six-sigma training from Motorola.
Cost to the company per employee for induction training, and their compensation, comes to an
astronomical figure of Rs 25 lakh in the first year alone. Here team leaders plays an important
role to help the trainees get exposer to the functional areas through on-the job assignments.
Problems: Employee relation is the biggest challenge, apart from nurturing a pro-active work
environment and giving self-respect to employees, DimondSoft offers a pay package, balancing
the fixed variables, long-term incentives and short term incentives components with strategic
focus on employee retention. The company recognizes that compensation and benefits are
critical factors for attracting retaining good talent. In a recent review of employee compensation
the following features of compensation management practice is creating difference between
employees. The difference in gross compensation between team leader and software developer
as well as the projects and support function playing a critical issue in compensation
management. Significant increase in basic salary and deferred benefits on the seniority basis as
well as there is discrimination in increment percentage across levels, projects, and functions.
There is group or team incentives for lower level but individual incentives at higher levels it
causes less pay-outs performance, incentives and commissions to software developers. There
are non-taxable allowances like soft furnishing allowances for team leaders onwards and convey
allowances depending upon seniority level. One of the biggest problem is restriction in
sabbaticals for higher studies to only those employee who are working for the company for more
than five years. The company provide discretionary rewards like reimbursement for travels for a
holiday including guesthouses, transit flats or offer fixed annual leave travel allowances only for
the higher level or senior managerial employees starting from the team leaders. These
compensation management practice causes the increase in attrition of software developers.
Solutions: Human resource accounting has enabled the company to assess the cost of such
attrition, exit interviews and human resource audits indicated the issue with the compensations
for lower level like software developers. The problems can be solve by the following ways:

 An employee’s perception that compensation received is equal to the value of the work
performed. A motivation theory that explains how people respond to situations in which they
feel they have received less (or more) than they deserve. So compensation should be paid on
the basis of performance of the employee and their contribution to the growth of the
company
 A person’s motivation to exert some level of effort is a function of three things expectancy
(that effort will lead to performance), instrumentality (the connection between performance
and the appropriate reward), valance (the value the person places on the reward). If any
factor is zero, then there is no motivation to work toward the reward. Employee confidence
building and training, accurate appraisals, and knowledge of workers’ desired rewards can
increase employee motivation.
 The increase in the salary should be on the basis of the performance and contribution to the
growth of the company not only on the basis of seniority level of employees.
 Individual team members may perceive that “their” efforts contribute little to team success
or to the attainment of the incentive bonus, so incentives should give on the basis on the
individual performance not in team. This will motivate the employee to work good for the
company.
 The opportunity for higher study should give to those employee who are loyal to the
company and contributes to the growth of the company. Also can provide Employee’s
spouse education assistance and meritorious Children of employees are provided
opportunity of higher education with loan benefits.
 Local housing and environmental conditions can cause wide variations in the cost of living for
employees. Inflation can require that compensation rates be adjusted upward periodically to
help employees maintain their purchasing power.
 The company can provide discretionary rewards like reimbursement for travels to all level of
employees for once in a year with their family according to their performance and to
motivate them to better and it will make them loyal to the company.
Recommendations: Recommendation for the compensation management of the company to
increase the performance and to reduce attrition are the followings:
 Awards: Often used to recognize productivity gains, special contributions or achievements,
and service to the organization. Employees feel appreciated when employers tie awards to
performance and deliver awards in a timely, sincere and specific way.
 Recognition: Recognition has a positive impact on performance, either alone or in
conjunction with financial rewards. Combining financial rewards with nonfinancial ones
produced performance improvement in service firms almost twice the effect of using each
reward alone. Day-to-day recognition from supervisors, peers, and team members is
important like best performer of the month awards
 Paternity leave: Paternity leave should be provide to the woman employee to create a better
relation between employee and employer.
 Company Car: Company car can be provided to drop and pick up for the employee and
security should be provided for the woman drop and pick up at late night.
 Profit Sharing: Any procedure by which an employer pays, or makes available to all regular
employees, in addition to their base pay, current or deferred sums based upon the profits of
the enterprise, paid once in a year or deferred sums until retirement. It leads to the increase
in performance and make employee loyal to the employer.
Conclusion: The implications of the above mentioned features may lead to the increase in the
performance of the employee and motivate them to do better, which may lead to the growth of
the company and make a better relation between the employee and employer and it will reduce
the attrition of the employee from the company.