COMPENSATION - Seniority based rewards reduced
turnover
OBJECTIVES :
Disadvantages: Doesn’t motivate job
performance ,discourages poor performance
Differentiate the types of financial rewards
from leaving , Golden handcuffs tie people to
Describe equity and its impact on pay rates the job because of generous benefits that
Discuss methods to address equity issues generate continuance rather than affective
commitments.
Distinguish the types and know the
process of job evaluation JOB -STATUS BASED REWARDS
Describe comparable worth and the Advantages:
- Tries to maintain internal equity
factors affecting women’s earnings
Minimizes pay discrimination
Compute for wage and salary in the Philippines Motivates employees to compete for promotions
Disadvantages:
EMPLOYEE COMPENSATION:
Encourages hierarchy, which may increase costs
All forms of pay or rewards going to employees and reduce responsiveness Reinforces status
and arising from their employment. differences
Motivates job competition and exaggerated job
Two main components:
worth
Direct financial payments: Pay in the form of
wages, salaries, incentives, commissions , and COMPETENCY BASED REWARDS
bonuses. Indirect financial payments: pay in Advantages:
the form of financial benefits such as insurance. - Motivates employees to learn new skills
- Tendsto improve quality with multi-skilled
employees
TYPES OF FINANCIAL REWARDS IN
THE WORKPLACE:
Disadvantages:
● Membership- seniority based - Subjective measurement of competencies
● Job status based - Skill-based plans are expensive because
● Competency based employees spend more time learning new
● Performance based skills
MEMBERSHIP- SENIORITY BASED
REWARD PRACTICES AT NUCOR
- Rewards employees on the basis of Nucor has survived and thrived in the
being part of the organization and years turbulent steel industry by motivating
rendered. employees with team-based and
- Sample: Fixed pay , most employee organizational-based rewards."We pay a real
benefits , paid time off low base wage, but high bonuses on a weekly
- Advantages: Guaranteed wages may
basis," explains a Nucor executive. "The
attract job applicants
bonuses are based on the quality and tons STOCK OPTION: A reward system that gives
produced and shipped through a team." employees the right to purchase company
stock at a future date at a predetermined price.
PERFORMANCE BASED REWARDS
Rewards employees on the basis of high levels EMPLOYEE STOCK OWNERSHIP PLAN
of performance-you earn more when you (ESOP): Reward system that encourages
produce more, and you earn less when you employees to buy company stock at special
produce less prices.
*PAY-FOR-PERFORMANCE: The incentives
are based on objective performance measures Advantages:
such as sales and productivity; also known as - Motivates task performance
earnings-at-risk (EAR) Attracts performance-oriented applicants
* MERIT PAY: The incentives are based on - Organizational rewards create an ownership
subjective performance measures such as such culture
as performance appraisal scores; good Profit sharing may avoid layoffs during
technique for jobs in which productivity is downturns because of its variability
difficult to measure
Disadvantages:
- May weaken job content motivation
- May distance reward giver from receiver
- May discourage creativity
- Tends to address symptoms, not underlying
causes, of behavior
IMPROVING REWARD EXPENSES
Link Rewards to Performance. Better
performers should be rewarded more than
poor performers; use objective performance
measures; rely on multiple sources of
PERFORMANCE- BASED REWARDS information; reward soon after the
performance occur; use large-enough dose
GAINSHARING: A team-based reward that (bonus rather than pay increase) so that
calculates bonuses from the work unit's cost employees experience positive emotions when
savings and productivity improvement. they receive the reward
Ensure That Rewards Are Relevant. Align
PROFIT SHARING: An organization-based rewards with performance within the
reward that pays bonuses to employees on the employee's control
basis of the previous year's level of corporate Use Team Rewards for Interdependent Jobs
profits. Ensure That Rewards are Valued. Do not make
false assumptions about what employees want:
ASK THEM!
Watch Out for Unintended Consequences. her coworkers are earning for the same or very
Pilot project before applying across the similar jobs within the company, based on
organization. everyone's performance.
COMPETITIVE STRATEGY AND PROCEDURAL EQUITY: The perceived
COMPENSATION fairness of the processes and procedures used
to make decisions regarding the allocation of
Aligned reward strategy pay.
EMPLOYER: Create a bundle of rewards, a
total reward package— specifically aimed at METHODS TO ADDRESS EQUITY
eliciting the employee behaviors the firm ISSUES
needs to support and achieve its competitive
strategy. Salary surveys: To monitor and maintain
* HR/COMPENSATION MANAGER: Write external equity
the policies in conjunction with top Job analysis and job evaluation: To maintain
management, in a manner such that the internal equity
policies are consistent with the firm's strategic Performance appraisal and incentive pay: To
aims. maintain individual equity
Communications, grievance mechanisms, and
EQUITY AND ITS IMPACT ON PAY employees' participation:
RATES To help ensure that employees view the pay
The Equity Theory of motivation process as transparent and fair (procedural
• Employees are strongly motivated to equity)
maintain a balance between what they ESTABLISHING PAY RATES
perceive as their contributions and their
rewards. Step 1. The salary survey
• Aimed at determining prevailing wage rates.
States that if a person perceives an inequity, • A Good salary survey provides specific wage
the person will be motivated to reduce or rates for specific jobs.
eliminate the tension and perceived inequity.
Formal written questionnaire surveys are the
FOUR FORMS OF EQUITY most comprehensive, but telephone surveys
• EXTERNAL EQUITY: How a job's pay rate and newspaper ads are also sources of
in one company compares to the jobs pay rate information.
in
other companies. Benchmark job: A job that is used to anchor
• INTERNAL EQUITY: How fair the jobs pay the employer's pay scale and around which
rate is when compared to other jobs within the other jobs are arranged in order of relative
same company. worth.
INDIVIDUAL EQUITY: The fairness of an
individual's pay as compared with what his or
the factors are summed for each job to provide
Step 2. Job evaluation a total score
A systematic comparison done in order to Plotting the actual salaries for each job against
determine the worth of one job relative to the point totals for each job.
another.
Comparable worth
Compensable Factor: a fundamental, The requirement to pay men and women equal
compensable element of a job, such as skills, wages for jobs that are of comparable (rather
effort, responsibility, and working conditions. than strictly equal) value to the employer
Examples of Compensable Seeks to address the issue that women have
Factors jobs that are dissimilar to those of men and
those jobs often consistently valued less than
men's jobs
Factors lowering the earnings of women:
• Women's starting salaries are traditionally
lower
• Salary increases for women in professional
jobs do not reflect their above-average
performance
• In white-collar jobs, men change jobs more
frequently, enabling them to be promoted to
higher level jobs over women with more
seniority
• In blue-collar jobs, women tend to be placed
• Consequences of error on the job in departments with lower-paying jobs
• Physical demands
• Mental demands Payroll Salary Compensation and Benefits in
• Working conditions the Philippines The Labor Code of the
• Education required Philippines, otherwise known as Presidential
•Training and experience requirement Decree No. 442, governs all employee
•Level of Responsibility employer relations, their rights and
•Skill required obligations.
WAGE AND WAGE-RELATED BENEFITS:
Four Steps in Job Evaluation using the
Point Method 1. MINIMUM WAGE
The Wage Rationalization Act, Republic Act
A panel determines the compensable factors No. 6727, sets the minimum wage rates
for the job applicable per region, province and industry
A panel judges the degree to which each job sector. Minimum wage may vary depending
has each compensable factors The point for
on the number of employees and gross-sales • The "no work, no pay" principle applies
of an enterprise and its industry sector. during special non-working days and such
Minimum daily wage in NCR is: other special days as may be proclaimed by
Non-agricultural (PhR 610.00), Agricultural, the President of the Philippines. Workers who
retail/service, and manufacturing (PhR are not required or permitted to work on these
573.00). Outside of Metro Manila, the days are, therefore, not entitled to any
minimum daily wage varies depending on the compensation.
region.
SPECIAL WORKING HOLIDAYS:
2. OVERTIME
The minimum wage is based on a work week For work performed, an employee in the
of 40 hours or 8 hours per day. The daily Philippines is entitled only to his basic rate.
60-minute mandatory lunch break is not ● April - No premium pay is required
included in the 8-hour workday and is not since work performed on said days is
compensated. considered work on
● New year's Day
Overtime pay rates vary depending on when ● ordinary working days
the overtime work takes place: regular
workday, holiday, rest day, or night (between PAYROLL SALARY COMPENSATION
the hours of 10pm to 6am). AND BENEFITS IN THE PHILIPPINES
Overtime Rates:
Regular workday: plus 25% of the hourly pay
rate.
Rest day, regular/special holiday: plus 30% of
the hourly rate on said day.
3. PREMIUM PAY: Premium pay refers to the
additional compensation required by law to be
paid to employees for work performed on
non-working days, such as rest days and
special days.
Premium Pay Rates:
• Rest day or special holiday - additional 30%
of his daily basic rate
• Rest day which is also a special holiday - 5. NIGHT SHIFT DIFFERENTIAL: For work
additional 50% of his daily basic rate done between the hours of 10pm to 6am,
• Regular holiday which is also an employee's employees are entitled to Night Shift
rest day - additional 30% of the regular Differential (NSD), which represents an
holiday rate of 200% * only applicable to additional 10% to the regular wage for each
employees covered by the holiday-pay rule. hour of work performed.
6. SERVICE CHARGES: The recently leave and solo-parent leave. The
enacted Republic Act No. 11360 and its gynecological leave and leave for women and
Implementing Rules and CE CHARGE their children who are victims of violence are
the other leaves considered under the labor
Regulations mandating that 100% of service code.
charges collected by establishments be given
to all covered employees. Service charges are MATERNITY LEAVE (R.A. 11210)
collected by most hotels and some restaurants, 105 paid leave days (live birth),
night clubs, cocktail lounges, among others. 60 paid leave days (miscarriage, emergency
termination of pregnancy),
Exceptions to Coverage of Benefits granted 7 days transferable to father (optional),
under the provisions on Overtime, Premium, 30 days additional leave without pay
Holiday, Night Shift Differential Pays and (optional)
Service Charges. • 105 plus 15 paid days leave for qualified
solo female parent
Government employees PATERNITY LEAVE: 7 paid leave days, with
Workers of retail and service establishments full pay, for the first 4 deliveries of his
regularly employing less than 10 workers legitimate spouse with whom he is cohabiting
Managerial employees and officers or
members of a managerial staff SOLO-PARENT LEAVE: 7 paid leave days
House helpers and persons in the personal
service of another ID
Workers who are paid by results/output
Field personnel if they regularly perform their every year (not convertible to cash) to attend
duties away from the office or place of child's milestones like birthday, communion,
business graduation). May request for flexible working
schedules
7. SERVICE INCENTIVE LEAVE: Every
employee who has rendered at least one (1) GYNECOLOGICAL LEAVE: A woman
year of service (whether service is continuous employee shall be entitled to a special leave
or broken) is entitled to a Service Incentive benefit of two (2) months with full
Leave who have very caused ecological riders
(SIL) of five (5) days with pay. SIL may be pay based on her gross monthly compensation
used for sick and vacation leave purposes. The following surgery caused by gynecological
unused SIL at the end of the year can be disorders
converted into cash using the salary rate at the
date of conversion. It is the employer's 10. 13th MONTH PAY: Each year, a 13th
prerogative to grant additional vacation leave. month pay is given to all rank-and-file
employees. By law, this benefit must be paid
PARENTAL LEAVES: The Labor Code of the before December 24th and is
Philippines covers three different types of mandatory.Employees who have resigned or
parental leaves: maternity leave, paternity have been disengaged from the company
before the payment of the 13th month pay are Example: an employee earning P14,000 per
still entitled to it in proportion to the length of month but worked for only six (6) months, the
time they worked for during that year. computation would be as follows:
P14,000 x 6 months = P84,000
MANAGERIAL VS RANK AND FILE P84,000 / 12 months = P7,000
EMPLOYEE Based on the computation, the employee's
13th-month pay will be equivalent to P7,000.
A managerial employee is one who is vested
with powers of prerogatives to lay down and Payroll Salary Compensation and Benefits in
execute management policies and/or to hire, the Philippines
transfer, suspend, lay off, recall, discharge,
assign, or discipline employees, or to 11. SEPARATION PAY: Following the Labor
effectively recommend such managerial Code of the Philippines, articles 283 and 284
actions. All employees not falling within this state that an employee can claim separation
definition are considered rank-and-file pay if his contract is ended under authorized
employees (Labor Code of the Philippines). causes. According to article 282, an employee
terminated for just cause (disobedience, gross
and habitual neglect of duty, fraud or willful
breach of trust, commission of a crime against
the employer or his family) is generally not
entitled to separation pay.
Separation pay may be computed based on the
terms provided in the employment contract,
company policy, or collective bargaining
agreement. Company practice may likewise be
used as basis for computation, if such practice
has been established for years and has already
ripened into a demandable right.
In the absence of contract or agreement, or
when the existing agreement or policy
provides for a lower benefit, separation pay
shall be computed based on the provision of
the Labor Code.
PRO-RATED 13th The amount depends on the cause:
Month Pay • If the termination is due to the installation of
• Employees who have worked for less than a labor-SEPARATION PAY
year or less than twelve (12) months will
receive a pro-rated 13th-month pay. saving devices or redundancy, the separation
FORMULA: pay is one-month's pay for every year of
Monthly basic salary X no. of months worked service or one month pay, whichever is higher
for the year with the company / 12 months
If the termination is due to retrenchment to • Following the tax code, benefits received are
prevent losses, or closure or cessation of excluded from the computation of gross
operation of the establishment not due to mcome as long as it remains below P30,000.
serious business losses, or "Gross benefits" include: the 13th month pay,
Christmas bonuses, productivity and incentive
Separation Pay bonuses, and other benefits of the same nature
is based on 3 Factors in cash or in kind.
1.AUTHORIZED CAUSE FOR In addition to that, compensations of small
TERMINATION value, called De Minimis Benefits, are also
excluded from the computation of gross
2.LAST SALARY income. De Minimis Benefits have the
due to disease, the separation pay is one-half purpose to promote the well-being and
month's pay for every year of service or efficiency of employees and are limited to
one-month facilities or privileges of relatively small size.
3 LENGTH OF SERVICE
pay, whichever is higher
• There is no requirement for separation pay if
the closure of the business is due to serious
business losses
12. RETIREMENT PAY: All employees
from the private sector may retire from age 60
up to age 65, at which retirement becomes
compulsory, and must have served the
establishment for at least 5 years.
Retirement
Retirement pay must at least be equivalent to
half of a month's salary for each year of
service and a fraction of at least 6 months is
therefore considered as one whole year.
Minimum Retirement pay = Latest
daily pay rate x 22.5 days per month x number
of years of service.
13. DE MINIMIS BENEFITS: To reward
employee performance and to set incentives
that are exempt of taxes under certain
conditions.
Payroll Salary Compensation and Benefits in HOME DEVELOPMENT MUTUAL FUND:
the Philippines De Minimis Benefits include:
• Medical cash allowance to dependents of The Home Development Mutual Fund
employees, maximum of P750 per semester of (HDMF), also known as the Pag-IBIG Fund,
P125 per month. is mandatory to all employees who are
• Rice subsidy, up to P1,500. compulsorily covered by the Government
• Uniform and clothing allowance, up to Service Insurance System (GSIS, for Filipino
P5,000 per year. Government employees) or the SSS. Through
• Actual medical benefits, up to P10,000 per Republic Act No. 9679, the HDMF answers
year. two important needs for Filipino workers by
• Laundry allowance, up to P300 per month. establishing a national savings program and an
• Employee achievement awards (loyalty affordable house financing system.
reward, safety reward) in forms other than
cash orgift certificates, and in a maximum
value of P10,000 per year in accordance to an
established plan which does not discriminate
to favor highly paid employees.
• Gifts given for Christmas, special festivities
or special circumstances (marriage, illness...)
cannot beover P5,000 per employee per year.
• Daily meal allowances during overtime.
work must not exceed 25% of the basic
minimum wage.
SOCIAL SECURITY SYSTEM: By law,
private sector employees must be covered
under the Social Security System (SSS).
Based on each employee's gross monthly pay,
both the employer and employee remit
monthly contributions to the SSS. In turn, the
SSS benefits cover maternity, retirement,
sickness, disability, death and pension
benefits.
• PHILHEALTH: For all employees covered
by the SSS medical coverage is mandatory
and automatic. Both the employer and
employee contribute equal monthly amounts
to the PhilHealth Insurance Corporation.
