Read the case and answer the questions below: Telco, is one of the leading Indian IT companies. Telco's compensation management system was created on the EVA (economic value added) model. With the application of Economic Value Added (EVA)-based compensation, the salary of employees included two parts - fixed and variable. The salary's variable part was arrived after taking into account the business unit EVA, individual performance EVA, and also corporate EVA. During the third quarter of the financial year (FY) 2008-2009, Telco stated its plans to slash 1.3 percent of the variable part of employee salaries since its EVA targets for the fourth quarter of FY 2008-2009 were not fulfilled. The declaration came as a shock not only to Telco employees but also to the whole Indian IT industry. The company was criticized by most of them and it was doubted for not being very clear relating to how the EVA was calculated. However, some experts felt that the pay cuts were the consequence of the macroeconomic challenges that the Indian IT companies were facing - rapid increase in the value of the Indian rupee currency against the US dollar and the recession that was going on in the US economy (USA was the biggest market for the In- dian IT companies) QUESTIONS:( Answer the questions in not less than 100 to 150 words) 1. Discuss various concepts related to compensation management. Outline Telco's' HR practices with respect to its policy related to compensation of its employees. (3+2=5 Marks) 2. Explain the significance of variable compensation in light of its ability to encourage employees and improve organizational productivity. Also, explain how any 3 external factors could affect Telco's HR policies relating to compensation. (2+3=5 Marks) 3. Examine the merits and demerits of the EVA-based compensation management System of Telco and also analyze EVA as a per- formance measurement tool. Identify the reasons behind the cut in the compensation of the employees at Telco. (2.5+2.5=5 Marks)