Human Resource Management

Prepared by: Shiela Catindig
Belen Bacossa

Compensation
It is the remuneration received by an
employee in return for his/her
contribution to the organization .
It is an organized practice that involves
balancing the work-employee relation by
providing monetary and non-monetary
benefits to employees Compensation.

Compensation Management
-an integral part of human resource management which helps in
motivating the employees and improving organizational
effectiveness.
The Compensation Management component enables you to
differentiate between your remuneration strategies and those of
your competitors while still allowing flexibility, control and cost
effectiveness. It provides a toolset for strategic remuneration
planning that reflects your organization culture and pay
strategies.

• When managed correctly, it helps the organization achieve
its objectives and obtain, maintain, and retain a productive
workforce.
• Compensation is a key factor in attracting and keeping the
best employees and ensuring that your organization has the
competitive edge in an increasingly competitive world.
• Without adequate compensation, current employees are
likely to leave and replacements will be difficult to recruit. The
outcomes of pay dissatisfaction harm productivity and affect
the quality of work life.

Types of compensation
1.Base Pay- typically a flat rate, either hourly wage or salary.
2. Wage and Salary add ons- includes overtime pay, shift
differential, premium pay for working weekends and holidays,
and other add ons.
3. Incentive pays- also called variable pay. These are for
performance and commonly include piecework in production
and commision sales.
4.Benefits- indirect compensation that provides comething of
value to the employee.

Apply the Concept:
1. I like working nights because it pays more.
2. After I graduate with BS Accounting, I’d like to
work for a firm that will help pay for me to get
my MBA degree.
3. The company only pays Php 40.31 an hour. I
need to find a better job.
4. I like getting paid the same each week. It helps
me to budget my expenses.
5. I’m good at sales, so I like being paid for every
sale I make.

Motivation and Compensation Planning
• Expectancy Theory
Expectancy theory states that employee’s
motivation is an outcome of how much an
individual wants a reward (Valence), the
assessment that the likelihood that the effort will
lead to expected performance (Expectancy) and
the belief that the performance will lead to
reward (Instrumentality).

Expectancy Theory
Reward
Significance
Effort
Performance

Motivation and Compensation
Planning
• Equity Theory
Equity theory is the principle of balance or
equity.

Objectives of Compensation Planning
• Internal Equity
• External Equity
• Individual Equity
• Attract Talent
• Retain Talent
• Ensure Quality
• New and desired Behaviour
• Control Costs
• Ease of Operation

Organizational Philosophy: How are we
going to pay?
• Performance or Longevity?
• Skill based or Competency- Based?
• At Above or Below the Market?
• Wage Compression
• Pay Secrecy

11–12
Legal Issues in Compensation
• Fair Labor Standards
Act of 1938
–Regulates the
minimum wage
–Sets overtime policy
(time and one-half
after forty hours)
–Child Labor

Job Evaluation
• The process of determining the worth of each position relative to the
other positions within the organization.

What are Pay Structures
Pay structures, also known as salary structures,
set out the different levels of pay for jobs, or
groups of jobs, by reference to:
• their relative internal value, as established by
job evaluation
• external relativities, via market rate surveys
• where appropriate, negotiated rates for the
job

Why do organisations need Pay
structure?
• establish a logically-designed framework within
which equitable, fair and consistent reward
policies can be implemented
• determine levels of pay for jobs and people
• basis for the effective management of relativities
• help monitor and control the implementation of
pay practices
• communicate the pay opportunities available to
employees.

Pay Structures
• Graded structures – a sequence of overlapping job grades
into which jobs of broadly equivalent size are allocated.
Each grade has a range, the maximum of which is usually 20
to 50% above the minimum.
• Broadband – similar to conventional graded structures, but
with far fewer and far wider bands. The maximum of the
band can be 100% or more above the minimum.
• Job Family Structures – Each job family has a different
graded structure. Jobs are allocated to a job family based
on activities carried out; skills and competencies e.g.
Information Technology is a perfect example of a job family
for which there is usually a separate grade structure.

Indirect Financial Compensation-
Benefits
• All employer provided rewards and services(
other than wages and salaries) arising from:
-Legally required social insurance payments
-private insurance and retirement plan
-payment for time not worked
-extra cash payments other than bonuses based
on performance
- Employee services

Employee Benefits
• Most benefits and services are available to
workers as long as they are employed by an
organization regardless of seniority or
performance.
• Decisions about indirect compensation are
more complex than those concerned with
wages and salaries

• Employers face rising benefits costs resulting
from:
- Increased legislation
- Insurer’s insolvency
- Cost of advanced medical technologies
- Aging workforce
- More women in the work force
- Global competition
Employee Benefits

Why are Benefits Growing as a Portion
of Overall Compensation?
• Tax Advantages
• Statutory Requirements
• Influence or organized labor
• Buying in Bulk

Consideration in Providing Benefits
Programs
• Amounts
• Mix
• Flexibility

Statutory Benefits
• Benefits that are required by the law.
Examples are:
• Social Security
• Retirement
• Disability and Survivor Benefits
• Medicare
• Worker’s Compensation
• Unemployment Insurance

Voluntary Benefits
• an employer of choice. It is the balancing act that is critical for employers
to get right – delivering an employee benefits program that works within
the organizations operational requirements and delivers real value for
current and future employees. Examples are:
• Paid time off
• Vacation Leave
• Sick Leave
• Holiday Pay
• Paid personal Leave
• Employee Services

Basic Employee Benefits in the
Philippines
Under the Philippine Labor Code are six basic employee benefits, for an
individual who is legally working in the Philippines. These basic
employee benefits cover most occupations, agricultural or non-
agricultural, provided that the associated compensation for every salient
Daily Minimum Wages still apply.
1. Social Security Systems (SSS) Contributions- (Republic Act No. 8282)
2. Contribution to National Health Insurance Program (NHIP)- (Republic
Act 7875)
3. Contribution to Home Development and Mutual Fund (HDMF)-
(Republic Act 7835).
4. The 13th Month Pay- Based on Presidential Decree No. 851
5. Service Incentive Leave- Article 95 of the Labor Code
6. Meal and Rest Periods- Article 83 of the Labor Code
7. Overtime Pay and Holiday/Rest Day Pay- Article 87
8. Night Shift Differential - Article 86

Other Company Benefits in the
Philippines
• Holiday/Christmas Bonus
• Mid-Year Bonus
• Cost of Living Allowances
• Paid Holiday and Vacation Leaves

Human Resource Management

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