COMPENSATION

AND
BENEFITS
 Compensation
it is what employees receive
 it means providing adequate and equitable
remuneration of personnel for their contribution to
organizational objectives.
all forms of financial returns and tangible services and
benefits employees receive as part of an employment
relationship
BASE WAGES OR SALARIES

The hourly, weekly, or monthly pay that employees

receive in exchange for their work. In most situations,
these make up the largest portion of an employee’s total
perception of the fairness or equity of the pay system.
The primary objective of any
base wage or salary system
To establish a structure for the equitable compensation of
employees, depending on their jobs and their level of
performance in their jobs. This simply means that if the
base wage and salary system are effective, a firm’s
compensation system can improve cost efficiency, ensure
legal compliance, enhance recruitment efforts, and reduce
morale and turnover problems.
The objective of compensation

To create a system of rewards that is equitable to the

employer and employee alike. The desired outcome is an
employee that is attracted to the work and motivated to do
a good job for the employer. The following are
suggestions to make the compensation policy more
effective.
Compensation should be:
Adequate
Equitable
Balanced
Cost-Effective
Incentive providing
Acceptable to the Employee
Compliant with legal regulation
 Main Components of
Compensation
Base pay – The hourly wage or weekly/monthly salary
earned.The current daily minimum wage for employees in
the National Capital Region (NCR) is P537.00, Per Wage
Order No. NCR-2 while in Iloilo City is Php. 395.00.
Premium pay – refers to the additional compensation
required by law for work performed within eight (8) hours
on nonworking days, such as rest days and special days.
 Main Components of
Compensation
Base pay progression – movement of base pay
overtime, from year to year.
Variable pay – incentive or bonus pay that does not fall
into base pay; such earnings may be based on
performance against preset goals (incentives) or pay at
the discretion of the company (bonuses); may be paid at
the individual, team, group, or organizational level.
 Wage vs. Salaries

Wages generally refer to hourly compensation paid to

skilled and unskilled workers or those performing blue-
collar jobs, with time as the basis in the computation.
Salary– income paid to an individual not on the basis of
time but on the basis of performance. Salaries are usually
given to professional and managerial employees or those
who are performing white-collar jobs.
 Labors and Wages

White Collar- Office Workers

Blue Collar- Manual Laborer
Pink Collar- jobs associated with women (e.g. nursing,
secretarials)
 Establishing Pay Rates
1. Conduct the salary survey of what other employers are
paying for comparable jobs (to help ensure external
equity).
2. Determining the worth of each job in your organization
through job evaluation.
3. Group similar jobs in to pay grades. Using the Point
Method, ranking Method and Classification Method you
will make your own table.
4. Price each pay grade using wave curves
5. Fine-Tune Pay Rates
1. Conduct the salary survey of what other employers are
paying for comparable jobs (to help ensure external
equity).
2. Determining the worth of each job in your organization
through job evaluation.
3. Group similar jobs in to pay grades. Using the
Point Method, ranking Method and Classification
Method you will make your own table.
4. Price each pay grade using
wave curves
5. Fine-Tune Pay Rates
Classification of Compensation
1. Piecework or payment by results

This is a system of pay based on the number of items

produced or processed by each individual worker in a unit of
time such as items per hour or items per day. Since
individual output can be easily quantified, peso value for
each unit or item produced is also given a fixed rate or
amount.
Classification of Compensation
2. Individual incentive plans

This rewards individual performance on a real-time basis for

meeting goal or hitting a target rather than increasing a
person’s base salary at the end of the year. An individual
receives some level of salary increase or financial rewards
in conjunction with demonstrated outstanding performance.
Classification of Compensation
3. Group incentives
These are given when it is difficult to measure individual
output or when cooperation is needed to complete a task or
project. An example of this is the gain-sharing program. This
is designed to share with employees the savings from
productivity improvements. This is based on the belief that
employer and employees have the same goals and thus
should approximately share an incremental economic gain.
Classification of Compensation
4. Performance-based Rewards
Organizations want employees to perform at relatively high
levels and need to make it worth their efforts to do so. It is
believed that when rewards are associated with higher
levels of performance, it will presumably motivate the
employees to work harder to achieve awards. In this
manner, their own self-interest coincides with the
organization’s interests. Thus, managers who truly want to
motivate people to perform at their highest level should
structure a reward system that engages in such behavior.
Classification of Compensation
5. Spot Bonuses
These are spontaneous incentives awarded to individuals
for accomplishments not readily measured by standard. An
example is to “recognize exemplary customer service each
month to identify employee of the month awardee”.
Classification of Compensation
6. Skill and Knowledge-based
Pay/Competency-based Pay

This sets pay levels on the basis of how many skills an

employee has or how many jobs he/she can do. This
emphasizes the importance of an employee’s ideas, growth,
and development.
Classification of Compensation
7. Merit Pay Plans

Merit pay is usually awarded to employees on the basis of

the relative value of their contributions to the organization.
Employees who make greater contributions are given higher
pay than those who make lesser contribution.
Classification of Compensation
8. Profit Sharing

At the end of the year, some portion of the company’s profits

is paid into a profit share pool, which is then distributed to all
employees. The rationale behind this scheme is that
everyone in the organization can expect to benefit when the
company does well.
Classification of Compensation
9. Stock Ownership Plans

Employees are gradually given a minor stake in ownership

of a corporation. Employees receive a claim of ownership of
some portion of the stock held by the company based on
seniority and perhaps performance. Eventually, even an
individual becomes an owner of the company.
COMPENSATION
AND
BENEFITS
BENEFITS
Are rewards given to an employee or a group of
employees for maintaining membership of the
organization.
Snell and Bohlander (2011) in the book Principles of
Human Resource Management, described benefit as an
indirect form of compensation given to help improve the
quality of work and personal lives of employees.
Mandatory Employee Benefits/Legally
Required Benefits in the Philippines
Social Security System (SSS) – The SSS was created
to provide private employee and their families with
protection against disability, sickness, old age, and death.
Government Service Insurance System (GSIS) – The
GSIS is the equivalent of SSS for Philippine government
employees.
 Home Development Mutual Fund (HDMF) - The HDMF
is a provident savings system providing housing loans to
private and Philippine government employees, and to self-
employed persons who elect to join the fund.
Mandatory Employee Benefits/Legally
Required Benefits in the Philippines
Philippine Health Insurance Corporation (PhilHealth) –
PhilHealth is administered by the Philippine National
Health Corporation, which is designed to provide
employees with a practical means of paying for adequate
medical care in the Philippines.
Employee’s Compensation – The employees’
compensation (EC) benefits or disability benefits is a
compensation package for public and private sector
employees and their dependents in the event of work-
related injury, sickness, disability, or death.
Mandatory Employee Benefits/Legally
Required Benefits in the Philippines
 13th Month Pay – Based on P.D. 851, all Filipino
employees are entitled to a year-end bonus equivalent to
one (1) month salary regardless of the nature of their
employment. The 13th month pay is to be given not later
than December 24 of every year a worker is employed.
Service Incentive Leave (SIL) – Based on the Labor
Code, an employee who has worked for at least one (1)
year in a company is entitled to five (5) days leave of
absence, with pay, every year.
Mandatory Employee Benefits/Legally
Required Benefits in the Philippines
Paternity Leave – Paternity leave is described by law
through R.A. 8187 granting every married male employee
seven (7) working days of leave after his legitimate wife’s
childbirth, or any miscarriage.
Meal and Rest Periods – Based on Article 83 of the
Labor Code, employees are entitled to one (1) hour break
for meals on an eight-hour workday. Employees are also
entitled to adequate rest periods in the morning and
afternoon, of short durations, that will be counted as hours
worked.
Mandatory Employee Benefits/Legally
Required Benefits in the Philippines
Right to Holiday under Article 94 of the Labor Code
Premium Payment – compensation for work hours
rendered exceeding the maximum number of working
hours which is normally 8 hours per day. Companies are
obliged by law to pay premiums when employees work on
holidays, on their rest day, and when they render extra
hours on any day (overtime).
 Computing Premium Pay
A special holiday (130% X basic pay)
A special holiday that falls on a rest day (150% X
basic pay)
A regular holiday (200% X basic pay)
A regular holiday that falls on a rest day (260% X
basic pay)
Mandatory Employee Benefits/Legally
Required Benefits in the Philippines

Night Shift Differential - According to Article 86 of the

Labor Code, every employee shall be paid a night shift
differential of not less than ten percent (10%) of his/her
regular wage for each hour of work performed between 10
o’clock in the evening and six o’clock in the morning.
Benefits Given Because of Management
Generosity
Holiday/ Christmas Bonus –This is given in December, on
top of the 13th month pay. This is considered as the
company’s Christmas gift to their employees.
Midyear Bonus—This is given in June, when the country’s
school year starts. This is to assist employees in school
enrollment fees for their children. This is also known as an
educational assistance plan.
Cost of Living Allowances—Some companies provide their
own employees with yearly rice, medicine, and clothing
allowance.
Benefits Given Because of Management
Generosity
Paid Holiday and Vacation Leaves—On top of the mandated 5
days per year leave with pay, some companies give their
employees additional paid holiday and vacation leaves.
Sick Leave—Some companies grant sick leave aside from
service incentive leave when an employee cannot report for work
due to illness or injury.
Emergency/Bereavement Leave—This provides the employee
with time off from work to plan and attend a funeral and to deal
with family matters surrounding death.
Benefits Given Because of Management
Generosity
Paid Holiday and Vacation Leaves—On top of the mandated 5
days per year leave with pay, some companies give their
employees additional paid holiday and vacation leaves.
Sick Leave—Some companies grant sick leave aside from
service incentive leave when an employee cannot report for work
due to illness or injury.
Emergency/Bereavement Leave—This provides the employee
with time off from work to plan and attend a funeral and to deal
with family matters surrounding death.
Benefits Given Because of Management
Generosity
Birthday Leave—There are already companies that started
giving their workers a present on their birthdays such as giving
day off during the actual birth date of the worker.

Healthcare/HMO Coverage—Aside from PhilHealth coverage,

most companies provide additional healthcare benefits through
selected HMO.
Benefits Given Because of Management
Generosity
Group Life Insurance—This provides lower rates for both
employer and the employee than if they bought such insurance as
individuals. Insurance coverage is not mandated but has become
such a standard benefit that most organizations elect to provide.

Pension Plans—These refer to the periodic payments to workers

who are retired from the company because of old age, illness, or
other reasons as determined by the employer and as provided for
in the plan.
COMPUTATION OF SALARY
COMPUTATION OF SALARY
COMPUTATION OF SALARY
 END OF
DISCUSSION