A personnel policy contains directive regarding: 1. Recruitment 2. Selection 3. Placement 4. Induction and Orientation 5. Promotions 6. Transfers 7. Demotion 8. Separation 9. Labour Turnover 10. Absenteeism 11. Discharge.

1. Recruitment:

It is the process by which manpower is discovered and then encouraged to apply for employ­ment. The purpose of recruitment is to collect sufficient number of applicants for each job, so that selection can be made.

Sources of Man Power:

The main sources of labour for all types of workers (unskilled, semi-skilled and highly skilled) are as under:


1. Through existing workers.

2. Employment Exchange.

3. Advertisements.

4. Schools, Colleges and Technical Institutions.


5. Through Contractors (for unskilled Labour).

6. Application at the Factory Gate.

7. From the application on the blank file.

8. Recommended candidates.


Employment Exchanges record show that unemployment of people is increasing at the rate of one lac persons every month. Total unemployed people were 80 lakh on July 31, 1975 and 1 crore 80 lakh on November 1981 and about 4 crore in 1992 and 5.5 crores by 1996.

Recruitment Procedure:

Whenever any vacancy occurs such as due to resignation, death, retirement, illness, promo­tion or expansion, the department concerned should intimate the same to the nearest Employ­ment Exchange and if possible should give its advertisement to public through some popular newspapers and also on the notice-board of the factory.

The personnel department must mention the following facts while advertising vacancies:


1. Number of vacancies.

2. Grade of vacancies.

3. General nature and special features to duties.

4. The quality of literacy and accuracy expected for the job.


5. Whether previous experience is absolutely necessary.

6. Last date of submitting applications.

7. Basic salary and other allowances.

Now interested candidates may apply on plain paper or in a special form, if any, obtainable from the employer for this purpose, giving the required details:


The applications received upto the last date of submission are collected, their summary sheet prepared and suitable candidates are then called for selection by interview or test or both.

2. Selection:

Selection is the process of examining the applicants with regard to their suitability for the given job or jobs, and choosing the best from them. Thus selection is essentially a process of picking out the man best suited for the organisation’s requirements. Selection process involves rejection of unsuitable or less suitable applicants.

Selection can also be defined as the process of securing relevant information about an appli­cant to evaluate his qualifications, experience and other qualities with a view to matching these with the requirement of a job.


For better performance, a worker must have the qualities which are necessary for effi­ciently performing the jobs and secondly the degree of these qualities, he possess. The first problem has been solved by the technique of job evaluation and the second by evaluation of psychological, aptitude and interview tests. These tests together now constitute a scientific method of selection.


The object of scientific recruitment and selection is to increase the overall industrial profi­ciency.

Importance of Vocational Guidance and Selection:

Vocational Guidance is a scientific method of selecting workers. Guidance aims at finding out what type of job will suit a particular worker and selection aims at searching (finding) out what type of workers from various applicants will fit the job, as employment of unfit worker (misfit) is wastage to industry.

In vocational selection, following considerations are made while selecting the workers:

1. The worker should have certain fixed health standard for the job.


2. He should have certain level of intelligence.

3. He should have the required type of mental skill.

4. He should have some personal qualities such as obedience, honesty, good tempera­ment, sincerity and willingness to co-operate etc.

Keeping in view the above facts, workers are selected and with aid of vocational guidance jobs are assigned to them. As we know that all workers differ in the physical abilities, inclina­tion, intelligence etc. and if the worker is not suitable for certain job, it does not mean that he is not suitable for any other job. The purpose of vocational guidance is to match a worker with suitable job so that his efficiency should be very high and he may have job-satisfaction.

Selection Process:

1. Initial screening.


2. Employment Tests;

(a) Achievement or Intelligence Tests,

(b) Aptitude or Potential ability Tests,

(c) Personality tests, and

(d) Interests tests.

3. Comprehensive Interviews including group discussions.


4. Background investigation.

5. Physical examinations.

6. Final employment decision.

Techniques and Methods Used for Selection:

1. Interview

2. Tests;


(i) Psychological Test,

(ii) Aptitude Test,

(iii) Trade Test, and

(iv) Medical Test.

These are called employment tests and selection of workers, supervisors and even manag­ers is done by these tests:

1. Interview:


This is one of the most popular techniques used for making selections. In this a panel of recruitment officers, one of whom from personal division, one or two from actual works division and one or two from general division is formed. Different recruiting officers put questions to the candidates on various topics and judge their ability and suitability. Candidates found suitable for the jobs are given appointment.

Interview is conducted to find out whether the applicant is dependable, adaptable, coop­erative, hard worker, motivated and good in human relations.

2. (i) Psychological Test:

In this, the candidate may be given different psychological tests so as to ascertain their hidden talents or reaction. His knowledge about the work is also esti­mated by this test.

These tests are not always cent per cent reliable, as the questions may be defective. The proper way would be to compare the information collected in personal interviews and from other sources.

This test is also known as ‘Intelligence Test.’

(ii) Aptitude Test:

By this test inclination of the person towards a definite job is deter­mined. For example whether he likes civil, electrical or mechanical job etc.

Aptitudes are grouped in five classes, these are:

1. Mental abilities,

2. Mechanical abilities,

3. Psychometric abilities,

4. Visual skill and

5. Other specialized aptitudes.

These are designed to measure ability in a given field. For example, mechanical aptitude can be measured by asking the applicant to solve some mechanical puzzle.

These tests do not measure personal qualities such as honesty, loyalty, leadership etc.

(iii) Trade Test:

This indicates the actual skill of the person in a particular job and is carried to judge the candidate’s proficiency in a particular job, trade or subject matter. Such test may be either oral, written or practical.

Exchange of Information in Selection

(iv) Medical Test:

When a candidate is found suitable before he is given appointment, a medical test is taken to see that he does not suffer from any contagious disease, permanent disabilities, likely to hinder their working.

This test is mostly to reject unsatisfactory candidates and should not exclude candidates whose disabilities will not interfere with the work.

3. Placement:

Placement is the determination of the job for which a selected candidate is best suited and assigning that job for him. It means the right man for the right job. A proper placement reduces employee turnover, absenteeism and improves morale.

4. Induction and Orientation:

Induction is the introduction of an employee to the job and the organisation. The idea be­hind this is that the new employee must feel proud of his association with the company.

Orientation covers the activities involved in introducing new employees to the organisation and to his work unit.

Orientation or induction is the process of receiving and welcoming an employee when he first joins a company and giving him the basic information he needs to settle down quickly happily and start work. The new employee is explained his duties and responsibilities, com­pany policies and rules, and other relevant information to get acquainted and accommodated with the organisation.

Objectives of Induction:

(i) To help the newcomer overcome his natural shyness and nervousness in meeting new people in new environment.

(ii) To build up the new employee’s confidence in the organisation and in himself.

(iii) To develop a sense of belongingness in newcomers.

(iv) To develop a cordial relationship between the newcomers and old employees.

(v) To give the newcomers necessary information about the organisation.

A good induction programme should cover the following:

1. Information about the company, products, manufacturing process and major tasks in his job.

2. Intricacies about the job including its hazards.

3. Organisational structure and functions of various departments.

4. Employees own position in the organisation and department.

5. Personnel policy of the organisation.

6. Service conditions, amenities, and welfare facilities.

7. Policies, objectives and rules and regulations of the company.

8. Grievance and discipline handling procedures.

9. Promotions, transfer, suggestions schemes, job satisfaction etc.

5. Promotions:

A promotion is usually made to place employees in positions for which they can be better suited. There they will develop high levels of abilities as it involves significant increase in income and responsibility.

Promotions are the form of awards which can be given for achievement and serve as a means of motivating individuals to increase their abili­ties. This also serves to increase the effectiveness with which manpower capabilities can be best utilized.

An atmosphere conductive to promotions must be created and employees must be kept informed about promotion changes. For this purpose, lines of promotion must be clearly defined where possible and a sincere effort be made to form a real promotion policy. In the promotion policy, system should be provided by which employees can appeal if they feel unjustly-over- looked, when promotions are awarded.

Negative promotions or demotions are usually problematic as they hurt an individual’s pride as well as his income. They also demoralise and hence should be avoided.

Promotion Policy:

Since promotion is a very sensitive and important issue for both the employee and the enterprise, each promotion should be made very carefully. Therefore each organisation must have its promotion programme and policy. Promotion programme is a detailed procedure for promotions. The promotion programme must be developed, based on the promotion policy of the enterprise.

Promotion policy should be such that a balance of new recruitment, to infuse new blood, and promotion system of existing competent employees. The promotion policy should be such that, when an employee is promoted, he should be acceptable to the subordinates and others so fair and impartial and remove all doubts about arbitrariness. It should be based on correct assessment rather than adhocism.

Every organisation should have a sound promotion policy regarding promotion of its em­ployees. The organisations not having it are likely to have frustrated and restless employees.

A good promotion policy should have following main features:

1. The ratio of internal promotions to external recruitment must be same in all depart­ments. This will create equal opportunities for promotion to all categories of employ­ees in all the departments.

2. It must indicate employees the avenues of advancement available to them. Multiple chain promotion charts may be prepared for this purpose. The charts showing ladders or paths of advancement or promotion routes are called opportunity charts.

3. The basis of promotion should be clearly specified. Due weightage should be given to seniority, merit and future potential of an employee.

4. Suitable training and development opportunities should be provided so that employ­ees can prepare themselves for advancement.

5. The policy should be fair, impartial and consistent.

6. It should be correlated with career planning.

7. A suitable system of follow-up, counseling and review should be established.

8. Provision for appeal, should be made.

9. Internal staff should be given a fair chance of promotion before higher level posts are filled from outside.

Promotion Systems:

1. Promotion by seniority.

2. Promotion by merit.

3. Promotion through Reports.

4. Promotions left to the Heads of the Departments.

Each system has its own merits and demerits.

1. Promotion by Seniority:

In this system, those who have put in some years of service are considered for promotion in order of their seniority.

Seniority as a criterion of Promotions:

The seniority has become a standard method of allowing promotions. Seniority is also used to make decisions for retrenchment, layoffs, declar­ing surplus, over-time assignment, retirement etc.

If seniority as a major factor and other factors are used in determining decisions of promo­tions then policies in its regard must be clearly and in considerable details should be formed. The most general principle of establishing a seniority system is that it should govern when there are not many differences in ability of individuals.


(i) Promotions motivate employees,

(ii) Builds up employee’s morale,

(iii) Increases job satisfaction,

(iv) Develops employee’s loyalty,

(v) Increase the overall efficiency, and 

(vi) Reduces labour turnover.

Since the promotions stop the talented persons joining the organisation and therefore, stops inflow of knowledge and new ideas, a fixed percentage is also inducted from outside.


(i) The initiative of the junior persons who are at the bottom is killed because they know that the chances of their promotions are low.

(ii) When a senior- most person knows that at his turn he will get his promo don, he will not try to have better qualifications or make extra efforts for self-improvement.

(iii) This system believes that all persons are fit for promotion, which is not correct and it will not motivate the workers.

(iv) There is a danger that when incompetent person gets promotion by virtue of senior­ity, the whole organisation suffers.

2. Promotion by Merit:

In this, the organisation fixes job requirements for all the higher posts as and when these fall vacant and all persons whether, inside or outside the organisation is allowed to compete so that those who are the best should come forward and have their chance.


(i) The owner gets the best persons available.

(ii) The owner engages fresh blood having initiative and insight into the job.

(iii) The owner gets the workers, who are necessarily needed.


(i) The initiative of the workers already working in the industry is killed.

(ii) The workers know that their seniority has no meaning for the organisation.

3. Promotions through Reports:

In this, the organisation is more concerned with results. All workers, senior or junior, with proper qualifications and experience should be given promotion, if their work has been found satisfactory by their superiors.


This system is not found much favourable, as employees believe that in this there are more chances of favoritism and nepotism.

4. All Promotions left to the Head of the Department:

It is argued that the head of the department will be the most impartial person in the organisation and his decision should usually be accepted to the workers.


It is not accepted by the workers, who feel that the head of the office is after all a human being. He is likely to be under pressure from certain sources. It usually happens that he does not use his judgment impartially with the result the deserving persons do not get their fair chances.

6. Transfers:

Transfers are carried out for following purposes:

(a) So as to people get more experience.

(b) To fill up the vacancy.

(c) To make employee fit for promotion and to discharge his job better after preparation.

(d) To keep employee interested in the work, it also avoid monotony in work.

Sometimes employees resists transfer either, they are not interested to shift their headquarters causing personal inconvenience or they fear that they may not be able to discharge the new assignment properly.

Transfers are made to place employees in position for which they are better suited. There they will develop new levels of abilities and ideas. Generally a transfer involves change of job or place or job and place of worker without any significant increase in income and responsibility.

Transfer can be categorized as:

(a) Production Transfers, or

(b) Personnel Transfers.

(a) Production Transfers:

When management shifts any worker for the purpose of im­provement in the organisation, such shifting is called “Production Transfer”.

(b) Personnel Transfers:

When a worker requests for transfer because he has interest in change or physical fitness, or he has clash with his boss or co-worker and/or he feels that he had not been placed at suitable job, constitutes personnel transfer.

Management is benefited from these transfers. If a personnel transfer is based on sound reasons it will result in employee’s being effective.

7. Demotion:

Demotion is just the opposite of promotion. It is a downward movement of an employee in the organisational hierarchy with lower status and lower salary. Demotion is a punishment for incompetence or mistakes of serious nature on the part of an employee. It is a serious penalty and therefore should be given rarely and only under exceptional circumstances.

Need for Demotion:

Demotion becomes necessary in following circumstances:

1. Adverse Business Conditions:

Due to recession and other crisis, an enterprise may have to combine departments and eliminate jobs. Consequently, junior employ­ees may be retrenched and senior employees may be required to accept lower level positions until normalcy is restored.

2. Incompetence of employee.

3. Technological changes may create circumstances in which some employees may be unable to handle their jobs or adjust to new technology.

4. Disciplinary measure.

It is always better to have a systematic policy on demotions.

8. Separation:

Separation of an employee from the organisation occurs when his service agreement with the organisation comes to an end because of the following reasons:

1. Retirement.

2. Completion of agreement period.

3. Resignation.

4. Lay-off

5. Retrenchment.

6. Dismissal from service.

1. Retirement:

Retirements can be:

(i) Compulsory retirement, i.e., retirement at the speci­fied age,

(ii) Premature retirement, i.e., retirement due to bad health and personal family prob­lem etc. In such cases he gets benefit of retirement provided the management allows premature retirement,

(iii) Voluntary retirement, i.e., to give an option to its employees with a certain minimum service for voluntary retirement in return for a lump-sum payment, when the organisation wants to cut down its operation.

2. Completion of agreement period:

Sometimes a person is engaged for certain period. In such cases he has to leave it on expiry of the agreement period.

3. Resignation:

Resignation or quit is a voluntary separation initiated by the employee himself. He may resign on grounds of ill health for better opportunities in other organisations.

4. Lay-off:

Lay-off means temporary removal of an employee due to circumstances beyond the control of the employer. Lay-offs are governed under the provisions of Industrial Disputes Act 1947.

5. Retrenchment:

Retrenchment means permanent termination of an employee’s services for economic reasons in an on-going concern. It is termination due to redundancy of workforce. Retrenchments are also governed under the provisions of Industrial Disputes Act, 1947.

6. Dismissal:

It is termination from service of an employee by way of punishment for misconduct or unsatisfactory performance if he has not potential to improve. Misconduct means willful violation of rules and regulations and includes indiscipline, insubordination and dishon­esty.

Since dismissal is a drastic step and therefore it should be resorted to with great care. It should be used as a last step after all attempts to salvage the employee have failed. Before an employee is discharged he must be given an opportunity to explain his conduct and to show because why he should not be dismissed.

9. Labour Turnover:

With the introduction of automatic machines and specialisation, the demand of workers has become increasingly less in industries. Therefore, the problem of giving jobs to workers and securing permanency in the working force are now no longer easy.

Due to this changed condi­tion, workers have started leaving job from one concern and go to join another quite frequently. The constant shifting of workers is a source of great industrial loss. The term ‘Labour Turnover’ is given to this change in the labourers of the factory and is measured as a percentage.

Labour turnover may be defined as “the number of separations per 100 of the average workers, from service during a particular period”. Separation include all quits, discharged or layoffs for any reason whatever.

Labour Turner over = Total separation/Average work force × 100

As an example, assume that the number of separations in a given week is 30 and that the average daily attendance for the week is 1000. Then the percentage of labour turnover on a yearly basis is

= 30/1000 × 100 = 3%

Cost of Labour Turnover:

A huge expenditure is involved in selecting and training the workers. The total cost of turnover will vary with the class of workers and the type of works, but it is not easy to obtain an exact mathematical data.

Cost of turnover can be judged by the following detailed expenses which are made on a new worker:

1. Interviewing.

2. Investigating the past records of the applicants.

3. Study of source of labour supply.

4. Medical examinations.

5. Instructing new workers regarding their duties and factory rules and regulations.

6. Wear and breakage of machines and tools by inefficient workers.

7. Reduction in production due to unfamiliarity of new workers with machines and sur­rounding.

8. Cost of spoiled work.

Causes of Labour Turnover:

These may be classified under two main heads:

(i) Those which are due to negligence of the employer.

(ii) Those which are due to some lack on the part of the employee.

The common causes are listed hereunder:

1. Fluctuation in the value of work.

2. Long hours of work and poor wages.

3. Bad working conditions result either in accidents or in sickness or in leaving workers due to dissatisfaction.

4. Bad training for new employees results in the new worker not being given a fair chance or is discharged at the end of probation period. The owner looses all the money spent on worker during training etc.

5. Bad system of selection of new workers causes waste of money, time and training to unsuitable candidates.

6. A bad spirit in the shops may cause unpleasant working which results in higher turn­over.

7. Insubordination.

8. Unsatisfactory procedure of discharging a worker.

9. Failure to protect the workers against accidents and sickness etc.

10. Unfairness in making promotions.

11. Inefficient management.

Methods of Reducing Labour Turnover:

Various important methods of reducing labour turnover are as under:

1. To plan production in advance for a reasonable time so as to keep an even load in the shops. It will reduce fluctuations in the volume of work to be done.

2. To provide better wages and good service conditions.

3. Reasonable hours of work. For this purpose Factories Act must be followed.

4. Free medical aid and care to safeguard of employees against sickness and accident. For this purpose Workmen’s Compensation Act must be followed.

5. Scientific method of selection and training to workers should be enforced.

6. Good working conditions reduce accidents. The welfare officer is responsible for main­taining good working conditions and environment. The cost of such facilities will be compensated by reduction in labour turnover costs. For this, provisions of Factory Act are to be observed.

7. Insubordination may cause labour turnover. It can be reduced by providing means of considering grievances.

8. Unsatisfactory procedure of discharging a person is one of the causes and the correct procedure will be that the personnel manager must have final responsibility of solv­ing disputes and no direct action should be in the hands of Foreman.

10. Absenteeism:

It means usually keeping away from the work. It may be even for a short period. It affects adversely on profit due to reduced output. It also creates indiscipline among the other workers. Therefore, this act of workers must be discouraged and steps for minimising absenteeism should be properly and carefully introduced.

The main cause of discontentment among the workers may be due to:

(i) Unpleasant work allotted to workers.

(ii) The work allotted is beyond the capacity and capability of workers.

(iii) Unfair treatment by the Superiors.

(iv) Personal homely problems of the individual workers.

(v) Low wages and so many such other factors.

11. Discharge:

A person may be discharged from the job for some justified reasons. For discharging or dismissing any worker at the factory a written permission from the competent authority is require.

An adequate record of such discharges must be kept and should be got signed by the concerned staff i.e. foreman incharge, production superintendent and personnel officer. Such record will be useful when a worker goes to the court. An employer cannot discharge any worker unless there are good and sufficient basis to prove to right discharge.