Lesson Examine the Functions and Importance of

Compensation, Wages and Performance

1 Evaluation, Appraisal, Employee Relations
and Movement
As you proceed to this module, you will understand the most important function of
staffing in management. Do you see yourself getting a high paid job in the future? If
given such opportunity to work, what benefits should you enjoy from the company
you’re going to work with? How will you interact with other people so you will be
promoted?

Notes to the Teacher

The teacher must take into considerations the essential

What’s In skills needed in the development of this competency
including the background knowledge which may reinforce
learning. This module will help the learners link the gap of
learning to achieve mastery of the lesson

Let us rewind and freshen up your

brain by completing the puzzle based
on our previous lesson. Write your
answer on a clean sheet of paper.

1 7

4 6

8
 1. The condition of having paid work.
2. It involves a group of people gathered to discuss a topic in front of an
audience, typically at scientific, business, or academic conferences, fan
conventions, and on television shows.
3. Refers to learning given by organizations to its employees that concentrates
on short-term job performance and acquisition or improvement or job related
skills.
4. The process of choosing individuals who have the required qualifications to
fill present and expected job openings.
5. Refers to filling in all organizational job positions.
6. A set of activities designed to attract qualified applicants for job position
vacancies in an organization.
7. Those who makes up the whole organization.
8. Refers to learning given by organization to its employees that is geared
toward the individual’s acquisition and expansion of his or her skills in
preparation for future job appointments and other responsibilities.

You have been puzzled in the early part of the

module and it’s a good thing that you
What’s New surpassed the activity given. And with that,
let us continue by asking you to think over
and brace ourselves ready as we exercise our
brain with some business vocabulary.

LET US ELEVATE OUR BUSINESS VOCABULARY.

The letters of the words below are jumbled. Figure out what the word is and write
the word on the blank line provided.

1. WSAEG _______________________________
2. AIPAPSLRA _______________________________
3. POROMIONT _______________________________
4. RSEIGANTNIO _______________________________
5. CMPOENTSAINO _______________________________
6. RAERWD STYSME _______________________________
7. MTONAYER RAREWD _______________________________
8. EEMLEYOP MVOEENTM _______________________________
9. EPMLYEOE RALTEISNO _______________________________
10. PCEROFMRAEN EAVULAITNO _______________________________

1. a fixed regular payment, typically paid on a daily or weekly basis, made by

an employer to an employee, especially to a manual or unskilled worker.
2. a process where employees performance is documented and evaluated.
3. the movement of an employee to a higher position
4. an employee’s voluntary decision to leave the organization
5. any tangible equivalent or reward for services rendered or for the
performance of a task performed in the organization.
 6. it’s purpose is to attract talented individuals, motivate them and retain those
that have a better fit with the organization.
7. rewards which pertains to money, finance, or currency.
8. it is the result of evaluation or structural changes within the organization.
9. the connections created among employees/workers as they do their assigned
tasks for the organization.
10. A process undertaken by the organization, usually done once a year
designed to measure employees’ work performance.

As your brain was twisted with the

words given above, now let us
understand the importance of these
What is It terms in organization particularly in the
staffing function as you go along with
the module.

Why do we work? Of course our answers would be because we wanted to earn a

living right? We wanted to be compensated according to what we have performed in
the organization as well as we all wanted to be given promotion as we go along with
the process. One should know that success can only be earn if they have work
hard for it and undergone the process. Now let’s examine the functions and
importance of compensation/wages, performance evaluation, appraisal, employee
relations and movement.

WHAT IS COMPENSATION/WAGES AND PERFORMANCE EVALATION &

APPRAISAL?

Compensation/wages and performance evaluation are related to each other

because the employees’ excellent or poor performance also determines the
compensation given to them, after considering other internal and external factors
like the actual worth of the job, compensation strategy of the organization,
conditions of the labor market, cost of living and area wage rates, among others.
Compensation may come in different forms. It may be direct, indirect or
nonfinancial.
Types of Compensation:

Direct Compensation Indirect Compensation Nonfinancial

Compensation
 Worker’s salaries Benefits other than  recognition programs
 Incentive pays financial remunerations:  enjoying management
 Bonuses  travel support
 Commissions  health  ideal work environment
 education  convenient work hours
 etc.  assigned to rewarding
jobs

Compensation Guidelines

Compensation guidelines are influenced by the nature and environment of a

particular industry. For example, the pharmaceutical, banking,
telecommunications, and hotel industries offer attractive compensation packages.
The government also imposes regulations and restrictions on salaries of employees
like the minimum wage law. As of December, 2019 the minimum wage law for the
National Capital Region (NCR) is P537 per day. Meanwhile, the minimum wage for
other regions is slightly lower. The wage law is set to protect manual workers from
being taken advantage of by companies.

Compensation is usually time-based. The term salary refers to compensation given

to professionals on a monthly or semi-monthly basis. The term wage refers to
compensation given on a weekly or daily basis and usually applies to manual
workers such as carpenters, plumbers, electricians, and the like. Base pay or
basic pay is the fixed part of pay. It is the minimum payment for the tasks
rendered by the employee based on his or her position or job title.

Purposes of Performance Evaluation: Administrative and Developmental

Improving individual job performance through performance evaluation is just one

of the reasons why employees are subject to assessment on a continuous basis.
There are other purposes behind employee assessment that are beneficial to the
company and employees:
Administrative Purposes – These are fulfilled through appraisal/evaluation
programs that provide information that may be a basis for compensation decisions,
promotions, transfers and promotions. Human resource planning may also make
use of it for recruitment and selection of potential employees.

Developmental Purposes – These are fulfilled through appraisal/evaluation

programs that provide information about employees’ performance and their
strength and weaknesses that may be used as basis for identifying their training
development needs. Through this approach, the workers become more receptive to
the explanations given by the organization’s management regarding the importance
of having evaluations at regular intervals – that these are conducted to improve
their competencies in order to prepare them for future job assignments. Different
performance methods are used and depending on the information an evaluator
aims to find out.
Performance Appraisal Methods

Methods of evaluating workers have undergone development in order to adapt new

legal employment requirements and technical changes. Some appraisal methods
used today are the following:

Trait methods – performance evaluation method designed to find out if the

employee possesses important work characteristics such as conscientiousness,
creativity, emotional stability, and others.

Graphic rating scales – performance appraisal method where each characteristics

to be evaluated is represented by a scale on which the evaluator or rater indicates
the degree to which an employee possesses that characteristic.

Forced-choice method – performance evaluation that requires the rater to choose

from two statements purposely designed to distinguish between positive or negative
performance; for example; works seriously – works fast; shows leadership – has
initiative.

Behaviorally anchored rating scale (BARS) – a behavioural approach to

performance appraisal that includes five to ten vertical scales, one for each
important strategy for doing the job and numbered according to its importance.

Behaviour observation scale (BOS) – a behavioural approach to performance

appraisal that measures the frequency of observed behaviour.

WHAT IS EMPLOYEE RELATIONS?

Employee relations apply to all phases of work activities in organizations, and

managers, to be effective, must be able to encourage good employee relations
among all human resources under his or her care. Employees/workers are social
beings who need connections or relations with other beings-other
employees/workers-who are capable of giving them social support as they carry out
their tasks in the organization where working on a delicate task with others can be
comforting during times of stress, fears, or loneliness.
Social support is the sum total of perceived assistance or benefits that may result
from effective social employee relationships.

Barriers to good employee relations Ways to overcome barriers to good

employee relations
 anti-social personality; refusal to  develop a healthy personality to
share more about oneself to co- overcome negative attitudes and
employees; being a loner behavior
 lack of trust in others  find time to socialize with co-workers
 selfish attitude; too many self-serving  overcome tendencies of being too
motives dependent on electronic gadgets.
 lack of good self-esteem  develop good communication skills
and be open to others’ opinion
 not a team player  minimize cultural/subcultural
 tension
 being conceited
 cultural/subcultural differences
 lack of cooperation
 communication problems; refusal to
listen to what others seek to
communicate
 lack of concern for others’ welfare
Can you still add ways on how barriers to overcome good employee relations?

Do you agree that social support and effective employee relations always go
together?

The following elements are considered in establishing and maintaining good

employee relations.
1. Drive for commitment. When a company fosters good relationship between
management and employees, the latter is most likely to become loyal and
committed to the organization.
2. Harmonization of terms and conditions of employment. Management
should ensure that employees are provided good work conditions and
benefits as stated in their employment contracts.
3. Emphasis on mutuality. Management must be inclusive and employees
must feel that managers are also a part of the work team.
4. Policies and practices for communication. Clear and honest
communication between employees and management is a vital component of
labor relations that will ensure continuous and harmonious relationship
among members of the company.

WHAT IS EMPLOYEE MOVEMENTS?

Employee movements are inevitable and are often the result of evaluation or
structural changes within an organization. An organization can move its
employees either vertically or horizontally. Vertical movement entails the
movement of employee from a lower position. Horizontal movements involve the
transfer of an employee to another department or position with similar
responsibilities or status.

Promotion is a movement to a higher level or position. Companies have different

criteria on promotion. The usual criterion is a combination of tenure and
meritorious performance.

Promotion or career advancement is a process through which an employee of a

company is given a higher share of duties, a higher pay-scale or both. A promotion
is not just beneficial for employees but is also highly crucial for the employer or
business owners. It boosts the morale of promoted employees, increases their
productivity and hence improves upon the overall profits earned by the
organization.

Tenure refers to the number of years in the service of an employee while

meritorious performance refers to an excellent or outstanding performance
of an employee. Some companies may have a clear preference based on
loyalty of the employee or performance may have more weight on the basis
 on how much the employee contributes to the achievement of corporate
goals.
Demotion is ―reverse‖ of promotion. Demotion is the lowering of a rank, reduction
in salary, status and responsibilities. It may be defined as the assignment of an
individual to a job of lower rank and pay usually involving lower level of authority
and responsibility.

Demotion may take place due to the following reasons:

a. Breach of discipline
A breach of discipline may attract demotion as a punishment. An
organization can work only if proper discipline is maintained. A punitive
action for such breach may be necessary so that people do not flout rules,
regulation etc. of the company.

b. Inadequacy of knowledge
A person may not be competent to perform his job properly. He may not be
able to meet job requirements. In such situation, demotion is necessary.
c. Unable to cope with change
Now-a-days, there is a rapid change in technology and methods of work. The
existing employees may not be able to adjust themselves as per the new
requirements. It may be due to lack of education, technical skill, ill health,
old age or other personal reasons. Under these circumstances new persons
may be needed to take up such jobs.
d. Organizational re-organization
Sometimes there may be organizational changes. It may be by either
combing the department or closing some departments. In such situations,
the number of position may no longer be necessary and other employee may
be posted to a lower position.

Transfer is a movement to another position but with the same level or scope of
responsibility. It can also mean a transfer to another branch or location but the
employee still occupies the same tasks. In some cases, an employee may have
another position but the level is still the same.
The last type of movement is separation or an employee’s departure from the
organization. It may take the following forms:

1. Resignation. This is an employee’s voluntary decision to leave the

organization. The usual reason for employee’s resignation is to look for
better opportunities in other companies and avail of higher salaries and
benefits.
2. Separation with authorized cause. More commonly known as layoff, this
is the company’s decision to terminate employees due to business reasons.
One of the more common reasons is redundancy, wherein the introduction of
new technology will duplicate some of the existing functions of certain jobs.
The current job holders of such functions will be given an appropriate
severance package when they leave the organization. The severance package
consists of a considerable monetary package to enable employees to
maintain their standard of living during the period that they are
unemployed.
 3. Separation with just cause. This occurs when an employee is terminated
due to theft, fraud, and other serious offenses. In this case the employee
does not receive any severance pay from the company. Apart from being
terminated from the company, an employee who was found to have
committed grave offenses may also be subjected to legal sanctions. An
employee who receives an unfavorable evaluation at the end of his or her
probationary period can also be terminated.
4. Retirement. This refers to the end of a worker’s employment with the
company due to old age, illness, or infirmity. There is no prescribed age for
retirement, although many companies set the normal retirement age for
employees at 60 years old. Some companies, however, set their retirement
age at 65. The retiring employee is given a retirement package as mandated
by law along with other voluntary benefits from the company.

Now that you have learned about

compensation, performance appraisal
and employee relations and movement,
let us again keep in our mind these
important concepts by answering the
What’s More activity given below.

Activity No. 1. Complete the word being described by putting the missing letters
in the boxes.

C M E S T O
1. the money received by an employee from an employer as a salary or wages.

T I M T D
2. performance evaluation method designed to find out if the employee
possesses important work characteristics such as conscientiousness,
creativity, emotional stability, and others.
B I C P Y
3. It is the minimum payment for the tasks rendered by the employee based on
his or her position or job title.

E C T V P Y
R
4. a compensation package for executives of organizations which consists of
five components: basic salary, bonuses, stock plans, benefits and
perquisites.

S C L S P R
R
5. is the sum total of perceived assistance or benefits that may result
from effective social employee relationships.
Activity No. 2 Fill in the blanks by choosing the appropriate word or group of
words in the box.

Drive for commitment harmony

Employee relations fairness

Policies and practices for communication

____________1. It is the sound of things that go together, as for people, it is having a

smooth relation with one another.
____________2. It is a clear and honest communication between employees and
management which is a vital component of labor relations.
____________3. It is more likely of becoming loyal and committed to the
organization.
____________4. An essential component that contributes to the success of a
company.
____________5. It is an impartial and just treatment for behavior without favoritism
or discrimination.

Activity 3. Mix and Match. Given below are skills and characteristics of an
employee in an organization. Classify the word or statements if the latter falls on
various employee movements. Put in the boxes provided before the number a
star if the employee deserves promotion, sad face if for demotion, and a
smiley face if it is for transfer.

1. Thinking outside the box always sets you apart from your co-workers.

2. You should never lie at work — more likely than not, your boss will
appreciate honesty.

3. An employee wanted his responsibilities to be reduced.

4. An employee committed a misconduct in the organization.

5. The organization open a new branch an one employee was shifted in the
place.
 You have surpassed activities written
on this module, and read about the
What I Have details of the lesson, now, can you put
Learned down on your notes the focus points of
the lesson? Feel free to write them on
your activity notebook by following the
table given.

FOCUS POINTS

Complete the table by filling in what you have learned.

Types of Purpose of Types of Employee Elements of

Compensation Performance Movements Employee
Evaluation Relationships

In a five sentence paragraph, can you connect the relationship of these terms,
knowing their importance in the organization? (refer to the rubric given on task 2 of
the module)
Let us full your mind with
these interesting stories?
Can you also be like these
What I Can Do people, the time you work for
yourself?

TASK 1. READ AND TELL.

―It was in 2007, when I heard from a friend that there is a fashion retailer called
H&M. I was looking for a room to grow and a happy working environment. Thus,
submitted my application on the H&M official website. At the beginning, I was a
Full Time Sales Advisor at the accessories department. Shortly after joining, I was
given the opportunity to provide support for a new store opening; 9 months later,
became the Department Manager at the kid’s and ladies departments of the said
organization.‖
- Candy Choi
“I joined H&M in 2007, as a part-time Sales Advisor while studying in the
university. Upon graduation, I became as full-time Sales Advisor, and after
approximately 6 months, I seized an opportunity to become a Cash Office
Responsible. During this time, I had been very honest with my manager about my
wish to be able to work abroad. Shortly after this, invitations to support the store
opening in Japan and Turkey were offered to me. My advice is to always speak out
because there is so many opportunities at H&M.‖
- Ian Tong

Questions:
1. What lesson can we gain reading their stories?
2. What type of employee movement employed to their situation?
3. Is it rewarding for an employee to be promoted?

TASK 2. BUILD ME UP.

Below is a picture showing an example of a good employee relations.

Why is it important to maintain a
harmonious relationship between management
and employees in an organization? Build your
words of not less than 200 words on a clean sheet
of paper. Your answer will be rated according to
the following:
3 2 1
Main idea or Response rephrases the Response declares Writer’s main idea
opinion question while declaring writer’s main idea or opinion is not
the writer’s main idea or or opinion. clear
opinion.
Details of Writer shares at least 3 Writer share 1 or 2 Writer shares little
evidence clear examples and examples and or no existence and
evidence to support evidence to support examples to support
their idea or opinion their idea or opinion their answer
Organization, Writer’s response has a Writer’s response Response needs
grammar, clear beginning, middle, flows, but he stronger transitions.
usage and and end. Grammar, beginning, middle Grammar, usage
punctuation usage and punctuation or end is not clear. and punctuation
makes the writing Grammar, usage make the text
readable. and punctuation difficult to
shows readability. understand.
 We’re one step away on the last part of
this learning module, can you get a
sheet of paper and answer this
Assessment assessment to yourself? Please be
guided on the policy of following your
integrity.

I. True or False. Answer T if the statement is correct and F if the statement is

wrong.

______1. Employees feel that their salary must commensurate to the efforts exerted
in the performance of their job.

______2. Performance evaluations done by companies never fail.

______3. The purpose of performance evaluation is for decision-making related to
promotions, transfers and terminations

______4. Employee appraisal is essential to ensure that employee performance

contributes effectively to the attainment of company goals.

______5. Monetary rewards are also called intrinsic rewards.

______6. The normal retirement age of Filipinos is set at 60 years old.

______7. The basic salary in the Philippines is applied to all regions.

______8. Employee movements are inevitable and are often the result of evaluation
or structural changes within an organization.
______9. The nature of compensation is determined by the competency level and
skills of the employees alone.

______10. Rewards may have a motivating effect to employees.

II. Choose the letter of the best answer. Write the chosen letter on a separate
sheet of paper.

1. Which form of separation is an employee’s voluntary decision to leave the

organization?
a. Resignation c. separation with authorized cause
b. Retirement d. separation with just cause
2. It is the movement to another position but with the same level or scope of
responsibility.
a. Demotion c. separation
b. Promotion d. transfer
3. Which among the following is NOT included?
a. Demotion c resignation
b. Promotion d. separation
4. Which of the following is a common reason for demotion?
a. Accuracy c. inefficiency
b. Congeniality d punctuality
5. Which refers to the end of a worker’s employment with the company due to
old age, illness or affirmity?
a. Resignation c. separation with authorized cauase
b. Retirement d. separation with just cause
 Congratulations! You’re now on the last part,
please follow IATF guidelines when doing this
activity. If you will be out for a while, use face
mask as you will be ask to conduct an interview,
or you may use messenger as your tool in having
this activity.
Additional
Keep safe and God Bless!
Activities
Conduct and interview with your family members or neighbors working in any
organization. Record the process on how their company is dealing with their
employee movements with regards to the promotion. Take a picture and video of
your conversation with them. The following are the questions to be asked:
o What is your previous position before you achieved your
current position now?
o How long did it take before you achieved your current
position no?
o What are positive points that you have which made you
in that position?
o What advice can you give the students of today which
can help them get a better job in the future and lead
them someday to their promotion?