Organization and Management

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Staffing Part II

Staffing Part II
This lesson is continuation of our previous discussion about Staffing. We will
discuss the concepts of wages and salary administration. Base wages and
salaries are defined as the hourly, weekly and monthly pay that employees
receive for their work in an organization.
In a capitalistic system, employees are supposed to be compensated fairly for
services that they render to the firm. Total compensation earned by
employees may consist of wages, salaries, fringe benefits and a form of profit-
sharing. Compensation levels of companies may differ even if they are in the
same type of business.
then our discussion will move to performance evaluation and appraisal,
employee relation, employee movements and reward.
Topic Outline:
1. Concepts of wages and salary administration
2. Performance evaluation and appraisal
3. Employee relations
4. Employee movements (promotion and transfer)
5. Rewards systems

Compensation
Compensation is the set of rewards that organizations provide to
individuals in return for their willingness to perform various jobs and tasks
within the organization.
• The person receiving a salary is not paid a smaller amount for working
fewer hours, nor is he paid more for working overtime. Someone who is
paid wages receives a pay rate per hour, multiplied by the number of
hours worked. This person is considered to be a "non-exempt" employee.

Factors Affecting Compensation Levels

The factors that influence the setting of compensation levels are:
Attitude of Management – some firms have the policy of attracting the best
qualifies applicants. In order to do this, management offers higher
compensation which could include housing benefits and/or profit sharing
schemes than the other firms in the industry. It is the belief of these firms
that better qualified applicants mean lower training costs and possibly, lower
employee turnover. Furthermore, firms which do this often believe that the
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 higher pay is offset by higher productivity. In general, multinationals and the
large Filipino-owned firms offer higher compensation levels than the
smaller-sized firms.
Job Specifications – job specification can be used to access the worth of each
job relative to other jobs. Using the job specification, positions in the firm
may be ranked or classified.
Environmental factors – the setting of wage or salary levels is not entirely
within the full control of management. In the Philippines, the law prescribes
a minimum wage. In the past, in addition to this minimum wage, a cost of
living allowance (COLA) per month was required by law. Furthermore, the
supply of and demand for labor for certain company positions is a significant
factor to consider in setting compensation levels.
Principles Governing Salary Administration
• Maintaining Competitiveness
• Matching Employee Expectations
• Reinforcing positive employee behavior
• Eliminating any discrepancy
• Optimization of management and employee interests
• Maintaining good IR and harmony
Purpose of Wage & Salary
• Attracting talented resources
• Retaining and motivating employees
• Financial Management
• Legal Requirements
Different forms of Compensation
 Payment for timed worked
 Incentive forms of compensation
 performance incentives
 spot bonuses
 skill and knowledge-based pay/competency-based pay
 merit pay plans profit sharing
 stock ownership plans
 executive compensation
Performance Evaluation/Appraisal
The identification, measurement, and management of human performance in
organizations.
There two types of performance appraisal:
• Informal Appraisal – conducted on a day to day basis.
• Systematic appraisal – occurs semi-annually or annually on a formalized
basis.
Four Major Purposes of Systematic Appraisal
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1. It lets subordinates know formally how their current performance is

being rated
2. It identifies those subordinates who deserve merit raises
3. It locates those subordinates who require additional training
4. It plays an important role in identifying those subordinates who are
candidates for promotion
Performance criteria
1. Relevance - relevance performance dimension are determined by the
duties and responsibilities contained in the job description.
2. Reliability - should produce consistent and repeatable evaluation
3. Freedom from contamination - should measure each employee's
performance without being contaminated by factors that an employee
cannot control such as: economic condition, material shortage, poor
equipment.
Sources of data in appraisal
1. Production data - evaluate the degree of dependable task
accomplishment by measuring quantity and quality of performance.
Example: peso volume of sales, return on investment, etc.
2. Personnel data - type of information found in an individual's
personnel files. Example: absenteeism, tardiness, etc.
3. Judgement of others - the spontaneous and innovative behavior of
an employee be assessed by the judgement of others. s
Employee Relations
Provides support to staff employees and supervisors regarding:
• Policies and procedures
• Work related issues
• Mediation and conflict resolution
• Disciplinary process
• Grievance process

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Employee Movement

Promotion - Involves the reassignment of an employee to a higher level job.

This also refers to the upward or vertical movement of employees in an
organization from lower level jobs to higher level jobs involving increases in
duties and responsibility, higher pay and privileges.
Reasons for Employee Promotions
• An effective way to keep good men in the firm
• As recognition of and reward for good performance
• To boost employee morale and encourage the employees to render to the
company the best service they are capable of
Basis or Criteria Used for Promotion
1. Seniority – length of service
a. Straight seniority – the length of service of an employee is the sole basis
for determining who gets the promotion.
b. b. Qualified seniority – the more competent employee as compared to
another employee with longer service will be the one promoted.
2. Current and past performance
3. Assessment centres evaluate the qualified candidates for promotion, w/c
focus on the kinds of skills and abilities to effectively perform the higher level
jobs that the candidates seek.
4. Competency or merit determined by the ratings or evaluations received by
the employees.
Unofficial Promotion Criteria
 Personal Characteristics
 Nepotism – showing of favoritism or patronage to relatives
 Social Factors
 Friendship
Promotion from Within
Filling up vacancies in upper level management positions by promoting
lower level managers.
A major advantage of this policy is its positive effect upon employee
motivation. Knowing that they have opportunity to be promoted tends to
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motivate employee’s performance with the company and to solidify their

feelings of loyalty toward the company.
Promotion from within
Advantages:
• Provides greater motivation thinking for good performance
• Provides greater promotion opportunities for present employees
Disadvantages:
• Creates a narrowing of and stale of ideas
• Creates political infighting
Demotion
The reassignment of an employee to a lower job involving fewer skills and
responsibilities. The movement of an employee to a less important job from a
higher level job in the organization which may not involve a reduction in pay
but a reduction in status or privileges.
Basis or Criteria for Demotion
1. Reorganizations, company merger or business contractions may result in
fewer jobs, forcing some employees to accept lower positions.
2. Inability of the employees to perform their jobs according to acceptable
standards.
3. As a form of disciplinary action or a way to handle disciplinary problems,
also viewed as a routine form of punishment for wrongdoing.
4. The tool used to communicate to employees that they are beginning to be
“liabilities” rather than assets to an organization.

Transfer
This is the reassignment of employee to a job with similar pay, status, duties,
and responsibilities. It also involves horizontal movement from one job to
another.
Reasons for Transfer
• Because personnel placement practices are not perfect, an employee -job
mismatch may have resulted.
• An employee becoming unsatisfied with his job for one or a variety of
reasons
• Organizations sometimes initiate transfers to further the development
and advancement of the employee especially at management and staff.
• Due to business expansion, retrenchment erroneous placement, the need
to meet departmental requirement during peak season.
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 • For personal enrichment/greater convenience and for more interesting
jobs.
• For employee to be better suited or adjusted to his job (remedial
transfer)
There are 2 Kinds of Transfer
Permanent – made to fill vacancies requiring the special skills or abilities of
the employee being transferred.
Temporary – made due to the temporary absence of an e employee, e.g., in
case of sick, leave, vacation leave, or shifts in the work load during peak
periods.
Employee Separation
Different kinds of separation occur depending on whether the employee or
the employee decides to terminate the employment relationship.
Layoff
The separation of an employee initiated by the employer due to business
reverses, the introduction of labor saving devices, or the reduction in the
demand for particular skills. Management as temporary measures during
periods of business recession, industrial depression or seasonal fluctuation
resorts
Resignation
This is when employees voluntarily decide to end their employment with an
organization.
Causes of Resignation
• Dissatisfaction about wages and working conditions
• Misunderstandings with supervisors or fellow workers
• Inconvenient work hours are among the chief reasons employee
resignation.
Retirement
This is when employees having satisfied certain conditions under existing
laws and/or provisions of the collective bargaining agreements or upon
reaching the age of 65 are separated from employment with entitlement to
retirement benefits. This is given either in a lump sum amount or in a form of
a monthly pension for life.
Termination/Discharge or Dismissal
The practice of putting an end to the employer- employee relations initiated
by the employer with prejudice to the worker. A discharge is due to some
fault of the employee such as inability to meet the company’s standards of
performance, incompetence, violation of company rules, insubordination, etc.

Rewards Systems
• Each element of compensation and benefits, is known as reward.
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• Total rewards include everything the employee perceives to be of value

resulting from employment relationship.
• This intervention involves the design of organizational rewards to
improve employee satisfaction and performance.
• Reward systems should take a holistic approach to achieving optimum
performance.
• Rewards can be monetary and non-monetary.
A company’s reward system refers to the totality of the inducements that a
firm provides in order to:
1. Attract people to work for the company
2. Motivate them to perform well while working with the company, and
3. Induce them to remain with the company over time.

- Salaries
Direct (cash) - Incentives
- bonuses

Financial

-insurance
-holidays
Indirect (benefits) -Medical and health
- Child care
- Employee assistance

Total Rewards

- Good policies and practices

- Competent supervision
Environment
- Safe and healthy work environment
-fair treatment

Non-Financial

- Interesting work
- Challenge
Job - Responsibility
- Recognition
advancement

Figure 9.1

The company’s reward system is made up not only of the compensation

system, but also includes such elements as recognition and symbolic
rewards, and other non-economic inducements such as good working
environment, pleasant climate of work, etc.
A company’s compensation system refers to all forms of economic
remuneration, whether in financial form or otherwise, which it provide to
employees. Compensation thus refers not only the salaries or wages, but also
to the other monetary and non-monetary benefits received by employees
from their employer.

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Total Rewards
• All of the tools available to the employer those may be used to attract,
motivate and retain employees.
• Total rewards include everything the employee perceives to be of value
resulting from the employment relationship.
• There are five elements of total rewards, each of which includes
programs, practices, elements & dimensions
• Those collectively define an organization's strategy to attract, motivate
and retain employees.
Five Elements of Total Rewards
Compensation - Pay provided by an employer to an employee for services
rendered (i.e., time, effort and skill)
Benefits - Programs an employer uses to supplement the cash compensation
that employees receive. - These programs are designed to protect the
employee and his or her family from financial risks.
Work-Life - A specific set of organizational practices, policies, programs,
plus a philosophy, which actively supports efforts to help employees achieve
success at both work and home. - Work-life strategies address the key
intersections of the worker, his or her family, the community and the
workplace.
Performance - Alignment of organizational, team and individual
performance is assessed in order to understand what was accomplished, and
how it was accomplished. - Performance involves the alignment effort
toward the achievement of business goals and organizational success.
Recognition - Acknowledges or gives special attention to employee efforts
or performance. - It meets an intrinsic psychological need for appreciation
and can support business strategy by reinforcing certain behaviors that
contribute to organizational success. - Awards can be cash or non-cash (e.g.,
verbal recognition, trophies, certificates, plaques, dinners, tickets, etc.).
Developmental Opportunities —A set of learning experiences designed to
enhance employees’ applied skills and competencies;
 Development engages employees to perform better and leaders to
advance their organizations’ people strategies.
Career Opportunities A plan for an employee to advance their own career
goals and may include advancement into a more responsible position in an
organization.
 The organization supports career opportunities internally so that
talented employees are deployed in positions that enable them to deliver
their greatest value to their organization.
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References
Rodriguez, R.A., Echanis, E.S., "Fundamentals of management"
Weihrich, H., Cannice, M.V., Koontz, H., "Management. A global and Entrepreneurial
Perspective, 13th Ed."
Corpuz, C.R. "Human Resource Management, 2006 Revised Ed."
www. managementstudyguide.com`
www.accountingtools.com

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