Analysis of Economic Factors in a Business

Analysis of Economic Factors in a BusinessProfit Sharing, tax revenue Sharing, Piece Rate, Time pin cl everywhere and Spot ChecksSubmitted by Group 6-Neethi Nair-14020541031Neha Paswan-14020541032Nilesh Tayade-14020541033Nishant Thool-14020541034Nishith Mohanty-14020541035Nitish Vats 14020541036Akanksha Chaudhary 14020541065Profit Sharing-Profit sacramental manduction atomic number 18 the commission plans to introduced by championship firms that provides direct or corroborative wages to the employees that is dependent on the gilds gain ground earned, in addition to the employees regular salary and bonuses.In public companies, these atomic number 18 the favourableness assigned to the employee as the equity shares.Profit sharing plans are generally based upon the predetermined economic sharing regulations that define how much should be fork between the company as a principal and the employee as an agent.The manager mint use this to enhance melt downers efforts making the workers requital dependent on the pro bring usefulnessability of the firm. Offering workers compensation that is tied to underlying positiveness provides an incentive for workers to put forth much(prenominal) effort.The company can also earn profit from this, by sharing the profit with the employees retirement benefit distinguish, which testament be non-tax incomeable for the company.Profit sharing is a type of variable pay, which is dependent on the profit gained by the company.Wells Fargo Company is an American multinational banking and financial dos holding company which is headquartered in San Francisco, California, with hub-quarters throughout the country. It is the fourth largest bank in the U.S. by as congeals and the largest bank by market capitalization.Its profit sharing is as follows-(https//www.wellsfargo.com/biz/retirement/profit-sharing-plans/)For companies, size really doesnt matter to offer profit sharing. Employee eligibility is set while joining.Employer Up to 25% of compensation or $52,000 in 2014. Profit sharing plans allow the company to vary every year according to the profit.The contributions are deducted from the taxable income.The withdrawn contribution and earnings are taxed as ordinary income.Stocks, bonds, mutual funds and Advisory Products available through a Wells Fargo Advisors brokerage firm account.There will be a 10% IRS early withdrawal penalty if the profit is withdrawn before age 59 unless valid exception.Exceptions every sidereal day retirement ageSeparation of service after five years and reaching age 55DeathDisabilitySubstantial equal midweekly earningss over life expectancyQualified military reservistRequired withdrawals essential begin at age 70Deadline to set up and Fund must be established by the last day of the business fiscal yearContributions whitethorn be made up through the business tax filing date (plus extensions)REVENUE SHARING Revenue sharing is a business arrangement that makes it possible fo r two or more parties to share in the profits and losses realized by a business operation. The exact structure of the revenue sharing st sum upgy varies based on governmental regulations that are applied in the jurisdiction in which the business is located, and the terms and provisions found in the contract that establishes the working relationship between the concerned parties. This fire may be utilize to compensate employees of the firm above and beyond the usual salary or wages, or be used to provide compensation to affiliate partners in an online business venture. Within a business setting, revenue sharing may take place as part of a particular(a) partnership arrangement. Here, the partners agree to share in the profits and losses sustained by the operation, with specific provisions on how those profits and losses are divided each accounting period. Essentially, the general partner has the responsibility of reporting the level of profit or loss incurred to the limited part ners, then compensating them according to the terms found in the partnership agreement.USER ROLESManagers will setup available business models and parts of them are the revenue share modelService provider will setup revenue share model associated to Applications and services, and they have to be loaded in the Revenue Settlement Sharing SystemDevelopers have to know somewhat the revenues of their applications and servicesInvolved service/applications providers have to know about the revenues of their applications and servicesThe following figure shows a conceptual architecture of a scheme for remittal and sharing revenues. There are a number of different sources of revenues for a given service that will be integ prized and processed according to the business model of each service and the revenue sharing policies specified for each partner. The final revenues balance will be transferred to a payment broker to free the payments to each provider/developer unconditioned Risk/Reward R evenue-Sharing model Case StudyRaising the Bar in Smart priceSmart Pricing has received a lot of attention in the Information Communication Technology (ICT) industry over the last 12 months. IT service providers are touting it as a key differentiator in a very competitive post-crisis environment, and organizations are demanding for more risk/reward and usage-based pricing so that their ICT partners have more accountability in each engagement and these ICT engagements are more aligned to business priorities. International Data Corporation (IDC) is predicting that Smart Pricing will account for close to 50% of all ICT services transactions by 2015. Infinite, an Indian IT services and software provider, has been one of the most aggressive services providers in this peppy changing market dynamic whereby approximately 30% of its total revenue is derived from risk/reward pricing models. Its intellectual propertybased revenue sharing model is certainly setting the pace in the industry whe re many a(prenominal) ICT service providers are still struggling to come up with the right formula. Infinite is non only setting the pace in Smart Pricing models in the ICT industry, it has clearly raised the bar for the rest of the field.Organization OverviewInfinite estimator Solutions is an India-headquartered global services provider of infrastructure management services, intellectual property (IP)-leveraged solutions, and IT services. The company focuses on the telecom, media, technology, manufacturing, power, and healthcare industries. Presently, telecom is its principal vertical and this includes telecom service providers as well as networking equipment vendors. Its services portfolios span application management outsourcing, packaged application services, independent validation and verification, harvestdevelopment and support, and higher value-added offerings including managed broadcast and product engineering services.It currently has 3,668 employees and has a global f ootprint of 16 offices across the globe including Singapore, the U.S., the U.K., India, Malaysia, and China. RD sites are concentrated in Indian cities like Bangalore, Chennai, Hyderabad and Gurgaon. The company is listed on the NSE and BSE and its FY10 revenue was approximately US$140 million. Infinite has a healthy mix of customers from the list of Fortune 100 companies including IBM, Alcatel Lucent, and Motorola across some(prenominal) verticals, but its strengths continue to be in the telecom and healthcare sectors.Challenges Solutions Mature products are targets Currently, Infinite works with organizations, examines their or their clients product portfolios, and identifies products or solutions that are get along and have a significant installed base. The products continue to be essential to many buyers, have a proven revenue generating record, and can be better silken via an off shoring model to India.The tiptop potential must be significant Infinite will have to execute careful due attention before actually making any large-scale investment. One of the guiding principles is that the product or solution must be able to deliver 20%50% growth over the next few years with further investments.Risk/reward pricing models vary Infinite has made significant hap in raising the share of its revenue that is derived from risk/reward pricing models. It currently stands at close to 30%, one of the highest if not the highest in the industry. Revenue derived or splits between Infinite and client varies from deal to deal but it is dependent on several factors. For every There are usually threesome sets of revenue streams to drive growth. Additional new sales of the product, services revenue, and annual maintenance are the three sets of revenue streams to drive growth. The combination of these three must be able to deliver an upside that ranges 25%50% of growth. The proportion of revenue that is attributed to the customer will generally be lower if the revenue ups ide potential is less, accounting for new investments that could refresh the product.How much to invest in the new product? Infinite would also need to do its due application program as to what and how much investment it needs to put into these products to generate the type of growth that it is looking for. Aware that some of these products have great fluctuations in revenue, which may be difficult to forecast, the company has to factor this into its planning.ResultsAccording to IDC this unique engagement model and smart pricing will eventually define the ICT industry over the next few years. Clearly one of the trendsetters, Infinite is setting an excited pace in Smart Pricing that many of its competitors will have to prank catch-up.Infinites unique smart pricing model has achieved sustainable returns. In todays economic environment, organizations are looking for flexibility and agility and as a result of this relationship, many of its existing clients are now able to realign the ir resources by channeling them into strategic areas of growth.Increase in the value of offerings as RD investment in core products as well as additional Infinite capital ploughed in will have the overall impact of enhancing the total solution or product portfolio.The company posts 20%50% revenue growth, usually depending on a number of factors including how speculative the product or solution is. Infinite is clearly on a growth trajectory and thus, its IP-based risk/reward model has found a warm reception among some organizations.Piece-rate pay-Piece-rate pay gives a payment for each item produced and is therefore the easiest way for a business to ensure that employees are stipendiary for the amount of work they do. Piece-rate pay is also sometimes referred to as a payment by results system, piece work or performance related pay. The oldest type of performance pay, piece rate is when an employee is paid a fixed rate for each unit of production. In other words, he or she is paid by results.For example, a factory worker may be paid per item he or she makes on a production line.In the United Kingdom and in various other countries with lower limit wage laws, pay rate must be used in unification with minimum wage laws for employees. For example, an employee who works at a $0.1 per-piece rate and completes 70 pieces in an hour would not receive $7.00 but would receive his states minimum wage, which skill be, for example, $7.25 an hour. However if he is able to work profuse enough to complete 90 pieces in an hour he can earn $9.00 per hour. So, per-piece rate pay can act as an incentive for employees. fillip contracts such as piece rank and profit sharing are designed to solve principalagent problems when effort is not observable. The benefits of the piece rate system is that it motivates employees financially to complete as much work as they can, and consequently they can increase their monetary reward by maximizing their output.A potential problem with paying workers based on a piece rate is that effort must be expended in quality control otherwise, workers may attempt to produce quantity at the expense of quality. Therefore, piece-rate pay encourages effort, but, it is reasoned, often at the expense of quality.From the employees perspective, there can be certain problems which might affect the production and eventually affect their pay. The problems which can possibly hamper the production may include breakdown of the production machinery or delay in the delivery of the raw materials which slows down the production. These factors are outside of the employees control but could potentially affect their pay.The solution to these problems is that piece-rate pay systems tend, to have two elementsA basic pay element which is a fixed time- based elementAn output-related element- Generally the piece-rate element is only elicited by the business exceeding a target output in a specific defined period of timePiece-rate systems are broadly classif ied into three categoriesi. Straight Piece-rateii. Piece-rate with Guaranteed time judgeiii. Differential Piece-ratesStraight Piece-rate method payment is made on the basis of affixed amount per units produced without regard to the time taken. consequently the earnings could be reckon as followsEarnings= Number of units x rate per unit.The fixations of piece rate generally depend uponThe comparable time rate for the same class of workersThe anticipate output in given timeIn Guaranteed time rates system payment is at time rates but adjusted to the follow of living. The employer balances the high labor cost by increasing the price of the products. The merit awards for skills, personal qualities, ability, punctuality etc. are also considered in this system.Differential Piece-rate system is a wage plan based on a standard task time wherein the worker receives increased or decreased piece rates as his production varies from that expected for the standard time. This is also known as an accelerating incentive.Comparison of three price rate systemsWages during Differential Piece ratePeriod Straight Piece rateGuaranteed Base wageStraight piece rate withminimum guaranteed wageStandard outputOutput in pieces producedTime clocks and point checks -Few methods of encouraging workers to put forth their best efforts are piecework, time clocks, and spot checks.Time clock is relatively saucer-eyed and inexpensive technique to introduce into a place of business however the flaws in it is that the information received from time clock is relatively useless in determining employees working habits. A time clock can only inform a manager of how long an employee spends in the workplace, but not how much time the employee is actually spending working i.e. how efficiently is he working. There could be a possibility that the employee is simply socializing most of the day or just doing the irrelevant tasks and the time clock would make no determination between employee with such be havior and the employee who works diligently throughout the workday. So, we can say that Time clocks dont monitor efforts made by the employee rather, simply measures his presence at the workplace from beginning to the end of workday. Thus it acts as an inferior method to monitor manager-worker problems.A more efficient method than Time clock that not just measures the time spent by employee at workplace ,but also measures his/her performance, is spot check. In this case the manager gives time to time visit at workplace to monitor its employees. The objective of these spot checks and inspections is to counter irregularities committed against the Community budget.The spot checks may concern, in particularBusiness books and documents such as invoices, pay slips, bank statements, lists of terms and conditions, statements of materials used and work done, and Computer dataPackaging, Production and dispatching systems and methodsPhysical checks as to the nature and quantity of goods or co mpleted operationsThe collection and checking of samplesThe progress of works and investments for which financing has been provided, and the how it has been usedAccounting and budgetary documentsThe technical and financial implementation of subsidized projectsThe advantages of spot checks are as followsIt reduces the cost of monitoring workersThe managers need not to be available at different places at same timeIt also increases employee efficiency. With workers not knowing if the manager will show up or not, they put more effort at work, as suddenly getting caught goofing off may lead to dismissal or a reduction in payAs everything has its pros and cons, same is the case with Spot checking. Some of disadvantages of spot checks are as followsFrequent spot checks, however, are costly and reduce the firms profitabilitySpot checks work, in effect, through threatThese can have negative impact on employees moral he/she cant work freely at workplace due to threat of being watched every mo ment.