Module 10 Compensation Policy and Administration

INTRODUCTION
COMPENSATION ADMINISTRATION
It is the most sensitive among all
functions of the HR department. The pay and
benefits you, as an employee, receive are a
yardstick of how adequately the company is
willing to meet your needs. Another name of
compensation administration is SALARY
ADMINISTRATION.
2

PLANNING
3
PLANNING
MERIT FOR THE CURRENT
FISCAL YEAR
APPROVAL
ADMINISTRATION
BUDGET PARAMETERS & PERFORMANCE
EXCELLENCE
THOROUGH EVALUATION FOR FINAL
APPROVAL BY HRMG, PRESIDENT &
CEO, GCG & DBM
IF WITH SALARY ADJUSTMENTS; MERIT
INCREASE & DISCRETIONARY INCREAS
DEPARTMENT/BRANCH LEVEL, DIVISION
AND NATIONAL LEVEL OR REJECTION
(REVISIONS)

A minimum and maximum
salary for each class has
been fixed and established
in accordance with the Job
Classification.
All salary increases are in
accordance with the graduated
steps in the pay class and
within the salary range for the
pay class occupied by the
employee.
Different companies have different policies regarding their salary administration
4
Normally all jobs in the
organization are classified
into various pay classes;
that is to say, a pay class
for each job.

01
02
03
SALARY STRUCTURE
5
LEVEL 1 - Jobs that are
highly manual, which involve
little skills and more of
physical exertion.
Jobs classified are: typing, filling
and other clerical works,
messengerial, collecting, janitorial
and driving.
LEVEL 2 - Jobs that involve
skill but require a little
planning and organizing.
Jobs classified are: stock
and inventory maintenance,
encoding, secretarial,
purchasing.
LEVEL 3 – Jobs that involve
talking to clients, coordinating,
collecting data, little decision-
making and a great deal or
report writing.
Job classified are:
telemarketing, research
assistant, executive
secretary.

SALARY INCREASES MODEL
6
General policies in salary administration:
MERIT SYSTEM
PROMOTIONAL SYSTEM
Ways of rewarding the employees based
upon efficient and economical but
satisfactory work performance
Higher wage rate paid to employee on the
basis of an agreed upon criteria such as
efficiency and performance. Also called
MERIT BONUS.
Moving an employee into a job with a
significant increase in duties and
responsibilities resulting in a grade, job title
and salary change.

PRINCIPLES CONSIDERED IN SALARY ADMINISTRATION
7
Equal pay for equal work;
A fair day’s pay for a fair day’s work;
and
Incentive pay for extra effort.

Problems in salary
administration
 The difficulty in determining what is
an adequate and fair pay for a
particular job.
 The utmost desire of the employees
to earn more money and
simultaneously of management to
operate and greater profit.
 Employees are not satisfied with
what they receive and they
continuously agitate for higher
salaries and benefits in order to
improve their living standard.
8

Problems in salary
administration
 Employer’s perennial concern to keep
the operating costs as low as possible
so that they could offer their products or
services within the reach of consumers.
 Employers were right to keep the
operating costs as low as possible.
Employees were right to demand for an
increase in wage due to the price hike of
the basic commodities.
 The lack of sound pay policy.
 The absence of written policy and clear
guide in determining the wage levels.
9

COMPENSATION
INDIRECT compensation
DIRECT compensation
 “The purpose of the compensation is to attract, motivate and to maintain employees”
 Compensation is the total cash and non-cash payments that you give to an employee in exchange for the work they
do for your business. It is typically one of the biggest expenses for businesses with employees.
Refers to the compensation that an employee
receives directly from his or her place of work.
This includes the base salary and any
incentive pay.
Direct compensation can be in the form of
wages, salaries, commissions and bonuses
that an employer provides regularly and
consistently.
Indirect compensation is the name
given to the more casual term
“employee benefits”.
Employee benefits refer to any number
of “bonuses” a company provides an
employee for joining, staying, and
exceeding expectations with it.
It includes everything from legally
obligated health insurance to social
security, child care, and more.

SOUND COMPENSATION IS
IMPERATIVE

The Power of PowerPoint | thepopp.com 12
WHEN THE PAY
POLICY IS
CLEARLY
SPELLED OUT.
WHEN THE
POLICY IS
UNIFORMLY AND
CONSISTENTLY
IMPLEMENTED.
WHEN THE WAGE
POLICY HAS IN-
BUILT
SAFEGUARDS.
WHEN IT IS
FLEXIBLE
ENOUGH TO
MEET ECONOMIC
CONTINGENCIES.
THE POLICY HAS
TO BE PROPERLY
DISSEMINATED
AND MADE
KNOWN TO ALL.

EMPLOYEE BENEFITS
In general, indirect and non-cash (or sometimes in cash) compensation paid by an
employer to employees in addition to their regular pay. Benefits tends to be necessities
for many people.
SOME BENEFITS ARE
MANDATED BY LAW (SUCH AS
SSS, PAG-IBIG, AND
PHILHEALTH), OTHERS VARY
FROM FIRM TO FIRM OR
INDUSTRY TO INDUSTRY.
13

EMPLOYEE SERVICES
According to the Employee Services Management Association, employee services encompasses
"recreation programs, community services, recognition programs, event planning, childcare/eldercare
services, convenience services, and travel offerings.“ Employee services can include anything an employer
deems necessary to provide as a perk for employees. No real limit exists as to what can be included as an
employee service. Employee services are more of a convenience than a true benefit.
14

TYPES OF
BENEFITS
 INSURANCE BENEFITS
 HEALTH BENEFITS (AND SERVICES)
 SECURITY BENEFITS
 TIME-OFF BENEFITS
 WORK SCHEDULING BENEFITS
 RETIREMENT BENEFITS
 DISABILITY BENEFITS
15

MANDATORY GOVERNMENT BENEFITS AND CONTRIBUTIONS
Covered by the Philippine Labor Code
SOCIAL SECURITY SYSTEM
Republic Act No. 11199 or otherwise
known as the Social Security Act of
2018 The social security system is
aimed at providing protection for the
SSS member against socially
recognized hazard conditions such
as sickness, disability, maternity, old
age and death, or other such
contingencies not stated but resulted
in loss of income or results to
financial burden.
PHILHEALTH
The employee and his/her
employer(s) are to contribute to
the medical insurance of the said
employee in accordance to the
Republic Act 7835 on Medicare
Program which is administered
by the Philippine Health
Corporation (PhilHealth).
HMDF/PAG-IBIG
Home Development Fund Law of
2009, employer(s) is required to
contribute per month not less than
100.00₱ to the employees Home
Development and Mutual Fund. In
accordance to the periodic
remittance schedule provided by
HDMF, employers will remit this
contribution, in addition to that of the
employees, which is to be deducted
from his/her payroll.
MID-YEAR & YEAR-END
The 13th Month Pay As
mandated by the Presidential
Decree No. 851, the employee
shall receive a bonus salary
equivalent to one (1) month,
regardless the nature of his/her
employment, not later than May
15 (MID-YEAR) and not later
December 24 of every year
(YEAR-END)
CONTRIBUTION CONTRIBUTION BONUS
16
CONTRIBUTION

COMPENSABILITYOF ILLNESS OR INJURY
17
UNDER EMPLOYEE’S COMPENSATION PROGRAM
OCCUPATIONAL
DISEASES
WORK-RELATED
INJURIES
UNEMPLOYMENT
BENEFIT
REHABILITATION
SERVICES
DISABILITY
Employee’s Compensation Program (ECP) - is a government program designed to
provide a compensation package to public and private employees or their dependents in
the event of work-related sickness, injury, or death.

COMPENSABILITYOF ILLNESS OR INJURY
18
UNDER EMPLOYEE’S COMPENSATION PROGRAM
Employee’s Compensation Program (ECP) - is a government program designed to
provide a compensation package to public and private employees or their dependents in
the event of work-related sickness, injury, or death.
DEATH BENEFITFUNERAL BENEFIT

PHILIPPINESBENEFITS SUMMARY
Under the Philippine Labor Code (Presidential Decree No. 442)

MINIMUM WAGE
The Wage Rationalization Act, Republic Act
No. 6727, sets the minimum wage rates
applicable per region, province and industry
sector. Workers that render services for a total
of 40 hours per week (8 hours per day, 5 days
per week) are entitled to receive at least the
daily minimum wage. National Capital Region -
the minimum gross basic wage is ₱512.00 per
day (as of October 2017).
Source: http://www.nwpc.dole.gov.ph/stats/current-real-minimum-wage-rates/ 20

21
NIGHT SHIFT DIFFERENTIAL
Night Shift Differential This refers to additional
compensation of at least 10 percent of an employee’s
applicable wage rate, payable to employees (except
exempt employees) who perform work between 10 p.m. to
6 a.m. of the following day.
“Exempt Employees”
 government employees;
 managerial employees and officers or members of the
managerial staff;
 field personnel;
 members of the family of the employer who are dependent
on him for support;
 domestic helpers and persons in the personal service of
another;
 employees who are paid by results, as determined by the
Secretary of the Philippine Department of Labor and
Employment (DOLE) in appropriate regulations; and
 House helpers and persons in the personal service of
another.

22
OVERTIME PAY
The normal working hours is 8 hours per day. An
employee who renders work in excess of eight hours
a day is entitled to overtime pay equivalent to the
applicable wage rate plus at least 25 percent thereof.
The overtime rate will vary if the overtime work is
rendered on a rest day, regular holiday or special day.
Under Rest day: regular/special holiday – plus 30% of
the regular daily salary. “exempt employees” are not
entitled to such overtime pay.

23
REST DAYS
Rest days employees, except exempt employees,
are entitled to a rest period without pay of not less
than 24 consecutive hours for every six consecutive
normal working days (i.E. Sunday).
Work done on rest days = plus 30% of the regular
daily compensation.
holidays
Unworked regular holiday (except exempt employees) =
REGULAR DAILY WAGE
Work on regular holiday = 200% or Double pay
Work on Special Holiday = REGULAR DAILY PAY + 30%
Rest day + Work on Special holiday = regular daily pay + 50%

LIST OF HOLIDAYS
24
Special Holidays
 Benigno S. Aquino Jr. Day (Monday
nearest 21 August)
 All Saints Day (1 November)
 Last day of the year (31 December)
REGULAR HOLIDAYS
 New Year’s Day (1 January)
 Maundy Thursday (movable date)
 Good Friday (movable date)
 Eidul Fitr (movable date)
 Eidul Adha (movable date)
 Araw ng Kagitingan (Monday nearest 9 April
 Labor Day (Monday nearest 1 May)
 Independence Day (Monday nearest 12 June),
 National Heroes Day (Last Monday of August)
 Bonifacio Day (Monday nearest 30 November)
 Christmas Day (25 December)
 Rizal Day (Monday nearest 30 December)

LEAVES
25
MATERNITY PATERNITY
GYNECOLOGICAL
DISORDER
DOMESTIC VIOLENCESOLO-PARENT
Leave of absence (LOA) or simply leave, is a period of time that one must be away from
one's primary job, while maintaining the status of employee. (Wikipedia, 2006)

13th Monthpay
(Presidential Decree No. 851)
All “rank and file” employees 13th month
pay = 1/12 (or 1 month) of the total basic
salary regardless the nature of his/her
employment, he/she will be paid not later
December 24 of every year.
Source: www.chanrobles.com/presidentialdecreeno851rules.htm
26

RETIREMENT BENEFITS
PRESIDENTIAL DECREE NO. 442
27
ART. 287. Retirement. - Any employee may be retired
upon reaching the retirement age established in the
collective bargaining agreement or other applicable
employment contract.
In case of retirement, the employee shall be entitled to
receive such retirement benefits as he may have earned
under existing laws and any collective bargaining
agreement and other agreements: Provided,
however, That an employee’s retirement benefits under
any collective bargaining and other agreements shall not
be less than those provided therein.
Source: http://www.chanrobles.com/legal4labor6.htm

RETIREMENT BENEFITS
PRESIDENTIAL DECREE NO. 442
28
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in
the establishment, an employee upon reaching
the age of sixty (60) years or more, but not
beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has
served at least five (5) years in the said
establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half
(1/2) month salary for every year of service, a
fraction of at least six (6) months being
considered as one whole year.

SEPARATION PAY
29
Employment separation occurs when the employment contract or at-will
agreement between an employee and his or her company comes to an end. Some
separations will be forced by an employer, including getting fired or laid off. Other
separations, like retirement or resignation, will be voluntary.
(Source: https://www.thebalancecareers.com/types-of-separation-from-employment-2061665)
Separation Pay Basis of separation pay:
1. Introduction of labor-saving devices = 1 month pay or 1 month pay every year of service
2. Redundancy = 1 month pay or 1 month pay every year of service
3. Retrenchment = 1 month pay or ½ month pay every year of service
4. Closure or Cessation of business = 1 month pay or ½ month pay every year of service
5. Disease the employee found to be suffering and whose continued employment is prohibited by law or
is prejudicial to his health as well as the health of his co- employees = 1 month pay or ½ month pay
every year of service * a fraction of at least six months is considered 1 whole year

1
2
3
4
5
https://www.slideshare.net/jobitonio/module-10-compensation-policy-and-administration-
122648224?qid=ad3d61b3-8170-40b1-b073-ec6c8f636d23&v=&b=&from_search=2,
ACCESSED AUGUST 18, 2019
https://www.slideshare.net/AnubhaRastogi/compensation-administration-wage-policy,
https://www.slideshare.net/gidebrando/hrmgt-6- compensation-policies-principles-and-
problems- in-compensation-administration, ACCESSED AUGUST 18, 2019
https://www.patriotsoftware.com/payroll/training/blog/what-is-compensation/,
Enjoy! :)
REFERENCES

Module 10 Compensation Policy and Administration

In this document