LESSON 5

Compensation/Wages
and Performance
Evaluation
Compensation/wages and performance evaluation are related
to each other because the employees' excellent or poor
performance also determines the compensation given them,
after considering other internal and external factors like the
actual worth of the 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.
 Direct compensation - includes workers'
salaries, incentiive pays, bonuses, and
commissions

Types Indirect compensation - includes benifits

given by the employers other than
of financial remunerations; ex: travel,
educational and health benifits, and others

Compensation Nonfinancialcompensation - includes

recognition program, being assigned to do
rewarding jobs, or enjoying management
support,ideal work environment, and
convenient work hours
 Connecting Compensation to
Organizational Objectives
Worker compensation/wages had
tremendously changed in the 21st
century due to increased market
competitions (both local and global),
EFFORT PAY
required skills from workers, and
changes in technology, among
others.

Compensation: A
Motivational Factor for
Employees
Compensations pay
represents a reward that an
employee receives for good
performance that contributes
to the company's success. In
relation to this, the following
must be considered:
Pay Equity -related to fairness, the Equity
Theory is a motivation theory focusing on
emplpoyees' response to the pay that they
receive and the feeling that they receive less or
more than they deserve.
Expectancy Theory - another theory of
motivation which predicts that employees are
motivated to work well because of the
attractiveness of the rewards or benefits that
they may pissibly receive from a job
assignment.
 Piecework basis - when pay is computed
according to the the number of units produced

Hourly basis - when pay is computed according to

the number of work hours rendered

Bases for Daily basis - when pay is computed according to

the number of work days rendered
Compensation Weekly basis - when pay is computed according to
the number of work weeks rendered

Monthly basis - when pay is computed according to

the number of work months rendered

Purposes of Performance
Evaluation:
ADMINIDTRATIVE PURPOSES
DEVELOPMENTAL PURPOSES Administrative Purposes -These are fulfilled
Administrative Purposes - These are fulfilled
through appraisal/evaluation programs that
provide information that may be used as basis for
compensation decision, promotion, transfers,
and termination.
through appraisal/evaluation programs that
provide information about employees'
performance and their strengths and weaknesses
that may be used as basis for identifying their
training and development needs.
 Traits methods - performance evaluation method
designed to find out if the employee possesses
important work characteristics such as
conscientiousness, creativity, emotional stability, and
others

Performance
Graphic rating scales - performance appraisal method
where each characteristics to be evaluated is
represented by a scale on which the evaluator or rater

Appraisal indicates the degree to which an employee possesses

that characteristics

Methods
Forced-choice method - performance evaluation that
requires the rater to choose from two statements
purposely designed to distinguish between positive or
negative performance; for ex: works seriously - work
fast; shows leadership - has initiative
Behaviorally anchored rating scale (BARS) - a
behavioral approach to performance appraisal that
includes five to ten vertical scales, one for aech
important strategy for doing the job and numbered
according to its importance.
Behavior observation scale (BOS) - a behavioral
approach to performance appraisal that meaures the
frequency of observed behavior.
 Why Some Evaluation Programs
Fail
inadequate orientation of the evaluates regarding the objectives of the program;
incomplete cooperation of the evaluatees (e.g. proper answering of evaluation
questionnaire);
bias exhibited by evaluators;
inadequate time for the evaluation forms;
ambiguous language used in the evaluation questionnaire;
employee's job description is not properly evaluated by the evaluation questionnaire
used;
inflated ratings resulting from evaluator's avoidance of giving low scores;
evaluator's appraisal is focused on the personality of the evaluatee and not his or her
performance;
unhealthy personality of the evaluator; and
evaluator may be influenced by organizational politics.
Thank You :)