TATA MOTORS - Group 2

TATA MOTORS:
COMPENSATION
RESTRUCTURING
Submitted by – Group 2
Arushi Kataria 19PGHR03

Anumay Jain 19PGHR21
Prachi Kumar 19PGHR28
Samyak Jain 19PGHR34
Tejas Karwa 19PGHR57
Understanding The
Company
Tata Motors history
 India’s largest automobile company with consolidated revenues of more than USD33
billion
 Six plants in Jamshedpur, Pune, Lucknow, Pantnagar, Sanand and Dharwad
 60% market share in commercial vehicles, 14% in passenger vehicles in India
 Conservative compensation strategy- salaries between 40 th and 50th percentile for
fixed pay, slight aggression in variable pay for senior executives
Peculiarities in the compensation structure
 NO. OF COMPONENTS (PAY MIX) : Elaborate pay mix with about 16 components
 PAY LEVELS (STRUCTURE) : Some allowances linked to basic salary
 BENCHMARKING (PAY POSITIONING) : Below market average fixed pay component,
aggressive variable pay but only for senior positions
 PERSONAL COMPENSATORY ALLOWANCE : Below market average fixed pay component,
aggressive variable pay but only for senior positions
 HOUSE RENT ALLOWANCE : Individualized Personal Compensatory Allowance used to
make-up for difference in HRAs during transfer to protect total salary
 SCHEMES : Compulsory PF and Superannuation deductions
 LOCATION DISPARITY : PCA retained from previous transfers too; Compensation of those
in Jamshedpur plant was lesser than those in Mumbai
Challenges faced due to these
peculiarities
 There were 17 pay grades in the compensation structure; this led to a lot of
confusion and extensive disparities in the salaries of employees
 Due to 16 components in the pay mix, even a little tweak in basic salary amounted
for drastic changes in the overall compensation.
 Except for managers in the executive levels (levels G-O) company followed a
conservative policy paying in the 40-50 %ile range.
 Internal inequity cropped up as salaries of the transferred employees and the new
hires differed significantly due to PCA provided to transferred employees, proving to
be demotivating for new employees.
 PCA retained from previous transfers too added to the loss to the organization as it’s
unnecessary and created further disparity amongst employees at same level.
 HRA policies created barriers to internal transfers across different locations; reduced
attractiveness of low class cities & resulted in different in-hand salary for employees.
 Compulsory PF and Superannuation deductions meant low in-hand salary for GETs
who looked for short-term incentives. It posed difficulty in retention and attraction of
talent.
Recommended changes
in the structure
 We propose to combine the grades which have similarity of roles reducing the number
of pay grades from 17 previously to 5 now.
 To ensure roles requiring special skills/years of expertise are paid differently than those
lying in the same grade we propose to introduce Pay Bands (wherein the basic would
differ), also, this would ensure presence overlaps across grades
 A fixed percentage of the basic pay is to be standardized as the HRA component.
 Employees shifting from upper class city to lower class city will not find a reduction in
their pay, in fact, they’d be better off with more in-hand salary as the cost of living in
lower class cities is much lower, leading to increased attractiveness of lower class cities
amongst young talent. Another advantage is that PCA can be eliminated as a component.
Recommended changes
in the structure
A standard basic pay (40% of the TFP) is to be paid to employees in the same grade.
Distinctions should be made in the variable part of salary.
 To acquire better talent in the initial stages, we recommend a better salary for
grades A-G. This would ensure that the right kind of young talent from top colleges is
in the leadership pipeline of the company as they prefer more in-hand cash and are
market-price sensitive.
 There are some components which might not make sense to entry level employees-
Gratuity, Superannuation, Child hostel allowance, etc. To avoid the problem of forceful
deductions, the company can introduce cafeteria scheme of bonuses/incentives where
employees instead of being eligible for a component, can choose which component
they really want.
 Emoluments which are of similar nature, can be combined, e.g., Child Education
allowance and Child hostel allowance; Officers and Executive allowance, Transport &
conveyance allowance.
Pay Mix
Earlier New
Basic Basic
Child education allowance

Child Allowance
Child hostel allowance
Executive allowance
Officer’s Allowance
Officer’s allowance
Housing allowance
Personal Compensatory allowance Housing allowance

(PCA)
Gratuity Gratuity
Superannuation Superannuation
Leave travel assistance (LTA) Leave travel assistance (LTA)
Special payment
Merit Pay
Merit Allowance
Transport allowance
Mobility Allowance
Conveyance allowance
Pay Range
 A pay range is attached to each grade. This allows scope for pay progression, which
is related to performance, competence or contribution.
 Pay Range is calculated by the formula
Pay Range = (Maximum Pay-Minimum Pay) * 100
Minimum Pay
 Differentials between pay ranges are the percentage by which the mid-point of a
range is higher than the mid-point of the range below (Assumed to be 20% in the
case)
 Overlaps is measured by the proportion of a grade which is covered by an adjacent
grade. An overlap provides more flexibility.
 To calculate the Pay Band, we obtained median of each grade and added 20%
differential to it
Merit Pay Grid
Performa A B C D E
nce
1 (15%) 20% 17% 14% 12% 10%
2 (30%) 16% 14% 12% 10% 8%
3 (40%) 12% 11% 10% 8% 7%
4 (10%) 6% 5% 4% 3% 2%
5 (5%) 0-1% 0% 0% 0% 0%
THANK YOU 

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TATA MOTORS:

Arushi Kataria 19PGHR03

Child education allowance

Personal Compensatory allowance Housing allowance

1 (15%) 20% 17% 14% 12% 10%

2 (30%) 16% 14% 12% 10% 8%

3 (40%) 12% 11% 10% 8% 7%

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