BPCL Case

Group 3 Members -
Rimjhim Shrivastava - 17030121055
Hrishikesh Chavan - 17030121137
 Question 3

What were the implications of the options available to the

management team in terms of the fitment benefit? Assume that the top
management had a budgetary constraint of not giving more than 40%
of the current wage bill. Based on this what position should the
management team take?
 What were the implications of the options available to the
management team in terms of the fitment benefit?

Wage Revision Process with Fitment benefit. Wage Revision without Fitment Benefit
• Basic = (Basic + DA) × 30 percent • Basic = Basic × Percent Increment
fitment benefit • DA = 8 percent × 4 × Basic
• DA = 0

Fitment Benefit is determined by two factors -

• Provided to management staff by the govt during the most recent pay revision.
• FB provided by other public sector oil companies during their recent wage settlement.
 Salary Revision Process for one employee
Salary Revision with Fitment benefit Salary revision without Fitment Benefit
1,500

• This is a graphical
representation of wage revision
1,000

calculation for one employee.

• Cost to company is 40% more 500

when Fitment Benefit is

included in the salary revision. 0

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 What were the implications of the options available to the
management team in terms of the fitment benefit?
• High cost of BPCL salaries led to a virtual freeze on recruiting new workers
• IOCL and HPCL: Provided FB of 30%. Hence BPCL was also expected to provide likewise.
• However, if a FB of 30% was offered, it would get difficult to meet budgetary requirements.
• Hence BPCL decided to forgo the fitment benefit during the latest pay revision.
• Implications of removing FB from pay revision could result in: dissatisfaction among
workers, protests by the trade unions, a high attrition rate, tarnish of brand image, and
competitive advantage for other oil companies.
Assume that the top management had a budgetary constraint of
not giving more than 40% of the current wage bill. Based on
this what position should the management team take?
Total Employee cost w.r.t. IOCL & HPCL
BPCL IOCL HPCL
40,000

Three Main reasons -

• Guaranteed promotion after a fix time 30,000

• Promotion raise of 5%
• Annual rise of 4% (Even if not promoted) 20,000

• No cap on max salary payable.

• Workers earned more than their supervisors 10,000

and managers.

0
2007-08 2008–09 2009-10 2010-11 2011-12

Average Employee Cost

 Position of the management team
• Abandoning fixed time based promotion and
30,000

giving merit based promotion.

⚬ Not entitle to increment after a certain
time. 20,000

⚬ Increment on the basis of merit

⚬ Promotion and annual raise should 10,000

decrease with increase in grade.

￭ To prevent high jump in CTC as seen
0

in highest clerical grade (11th)

11

12
98

99

7
1

0
2

8
4

05

9
0

0
0

1
0

0
0

0
0

20

20
19

19

20
20

20
20

20

20

20
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20

20
20
GROWTH IN SALARY OF A CLERICAL GRADE 11 WORKER,
(1998-2012)
 Position of the management team
• Cap on Maximum salaries given to workers.
⚬ Maximum cap on each grade comparing with its competitors.
• Assigning shifts & uniform working hours to everyone.
⚬ Preventing involuntary overtime.
￭ Avoiding premium pay (double wages) situations
￭ Resulted in total 925,087 OT hours in 2012 costing $6.52 million.
⚬ Reducing overtime pay to 1.5X the regular wages.
• Management should take over panel operations of Mumbai refinery.
⚬ Faster decision making
⚬ No control of the trade unions
￭ Flexibility during strikes and slowdowns
Thank you