Wage Supplements
When some workers are benefitted by payments
and contributions of their employers which are not direct
payments for work performed on the job, although in an
indirect way, they represent rewards for services
rendered.
Some of the major types of extra remuneration
or benefits received by employees are pay for vacations
and holidays wherein work was not rendered, sick and
old age benefits that are provided by law, and bonuses
other than those paid as a reward for extra output or time
spent on the job.
FORMS & EXAMPLES OF WAGE SUPPLEMENTS
I. Profit Sharing- Profit sharing is an “agreement (formal
or informal) freely entered into by which employees
received a share fixed in advance of the profits.”
Others describe it as “payments in the form of cash,
stock, options, or warrants.
TYPES OF PROFIT SHARING SCHEMES
1. Profit sharing alone
2. Profit sharing with co-partnership
3. Profit sharing with some kind of co-partnership
through ownership of shares in the company by
employees.
ADVANTAGES OF PROFIT SHARING
1. To encourage employee efficiency and stimulate more
production.
2. To secure more flexibility in the payroll
To reduce labor turnover.
3. To encourage unionism or at least minimize its
militancy, strikes and other forms of industrial unrest
become prevented since employees feel they have a
stake in the profitable operation of the enterprise
II. EMPLOYEE COVERAGE AND BENEFITS
Employee groups such as officers and top
executives, department head and supervisors, salaries
clerical workers, and hourly paid workers, professionals
and production and maintenance employees (non-union)
are often covered.
 KIND OF BENEFITS
 VESTING
 DISBURSEMENT
 GROWTH OF PROFIT SHARING PROGRAMS
III. SPECIAL BONUSES
Some employees secure other types of bonuses
which are not directly related to production standards or
work schedules.
 Christmas Bonuses
 Production Bonus System
 Halsey Plan
IV. COST OF LIVING ALLOWANCES
-Under the Labor Code of the Philippines, a
"cost of living allowance" is granted to workers as a lump
sum payment that is adjusted based on the cost of living
index.
-Its purpose is to maintain wage levels during
times of recession and provide workers with additional
income equivalent to the increase in the cost of living.
-Paid sick leave is also provided under labor laws
and collective bargaining agreements.
Incentives Scheme
- are the programs designed to encourage and motivate
workmen for higher efficiency and greater output
- The Incentives are the monetary rewards given to the
workmen in recognition of their achievement of specific
results during a specified time period.
—Incentives can be classified into 2 types
1. Financial (Monetary) Incentives
2. Non-Financial (Non-Monetary) Incentives
Types of Incentives Scheme
1. Simple Incentive plan
- this plan can be based either on a piece per piece for unit
of output or on straight time work.
- the simplest, oldest and the most commonly used
method.
2. Premium System
• Taylor’s Differential Piece-Rate system
- Introduced by F.W. Taylor, who believed that the
workers should be paid on the basis of their degree
of efficiencies.
• Merrick Differential Piece-Rate System
- Three piece-rates are used to distinguish between
the beginners, the average workers, and the
superior workers,
• Gantt Task System
- The standard time is fixed for the completion of a
task based on a careful time and motion study.
- Emerson Plan
- The standard time for the completion of a task is fixed
against which the actual performance of the workers is
measured.
3. Point Premium Plus
-The original and best-known point pre-premium plan was
introduced by Charles E. Bedaux in 1916
- Bedaux Plan is an incentive scheme in which the
standard time for the completion of a job is fixed and the
rate per hour is defined..
4. The Scanlon Plan
- is cost-saving, gain-sharing, productivity-incentive plan
in which any saving (agreed upon standard labour cost per
unit of output subtracted from actual labour cost per unit of
output) is shared equally between the workers and the
organization.
- Joseph Scanlon was the developer of Scanlon plan
5. Group Incentive Plan
- system is employed in cases where the ultimate
production is dependent on the efficiency of a group of
workers.
Types of group incentive plan to consider
—Gain sharing ---Non-cash
—Merit Based
—Profit-sharing
6. Bonus
- it refers to any method used to increase the laborer’s Incentives Plans
production by giving him extra pay for more than the -On the basis of studies made, there are strong
standard quantity of work. evidences to show that there are logical connections
between managerial pay and company performance.
Frince Benefits 1. Cost/benefit Analysis - A successful management
• Perks or Extra compensation given over and/or above incentive plan must generate increases in company
regular salary profits greater than the cost of the rewards and the
•Salary with a fringe on top expense of maintaining the plan.
2. Company Analysis - No incentive plan is tailored-cut
Types of Frince benefits to suit the needs of every company.
—Medical Programs 3. Participation - The coverage of the plan
—Subsidized meal must be clearly delineated, that is, it is limited
—Phones/Laptops only to those managers who directly and
—Life insurance significantly affect company performance.
—Vacation 4. Plan structure - To make the incentive plan a
success, the structure must be made simple, easy
Non-Financial Benefits to understand and implement.
1. Public recognition 5. Substantial rewards - The rewards
2. Extra day off offered under the incentive plan must be
3. Opportunities for professional development and fairly substantial.
Career Growth 6. Sharing rate - The maximum amount that
4. Team building and social activities any one manager can earn should be open-
ended, but based upon a percentage of the
5. Flexible work Arrangement
total profits that will be paid out.
6. Ask for new ideas, feedback, and suggestions
7. No-bonus zone - For purposes of stressing
emphasis on superior performance, no reward
Attitudes of Workers should be given for marginal improvement.
Workers’ and unions’ opinions regarding incentive 8. Payout provisions - The matter of
payments vary. Some people are against schemes payment of rewards should also be clearly
because of the complexities and employer-benefit issues, spelled out.
while others favor them. 9. Emphasis on long-term results - Every
incentive plan must be anchored on long-
Characteristics of Professional and Managerial term company growth and profitability must
Employees be its sole basis.
1. They are highly intelligent.
2. They have an analytical frame of mind and a Deferred Benefit Payments
preference for deductive reasoning. -deferred benefit payments involve
3. As a group, They tend to be more creative and withholding a portion of an employee's
imaginative than others. compensation, such as salary or bonuses,
4. They are usually both independent and self- and postponing its distribution until a later
conscious date, often upon retirement or meeting
Management’s Low Productivity specific conditions
- is often caused by the lack of Types of Deferred Compensation Plans:
understanding of the relationship  Qualified or unqualified
between performance and money.  Unqualified plans may be funded or unfunded
Influence of Rewards Decisions
- rewards decision have influence that is broader TOTAL REWRADS STRATEGY
than their impact upon the individual employee,  It encourages the organizations to move
manager, and organization involved in the
towards the a pay-for-performance philosophy
immediate decision. providing opportunities for top performers to
Designing Management Incentives earn higher base salaries through a well-
-Growing recognition that incentives focus on managers defined performance evaluation program
attention on results.
embracing a meritocracy culture.
Small Business Report
-The idea that a manager can increase productivity to
such an extent that it warrants being paid twice or even COMPENSATION
three times BASE PAY – Wages and Salary
 MERIT PAY – Base-pay increases based on
employee performance
INCENTIVES – Cash bonuses based on
employee performance
PROMOTIONS – Base-pay increases based on
potential to perform new job
PAY INCREASES – Base-pay increases base on
length of service with the organizations
BENEFITS
HEALTH AND WELFARE – Payment for injuries
and illness both on and off the job
PAID TIME OFF – Payment for vacation time or
excused days from work
RETIREMENT – Payment for no longer performed
based on the length of employment
PERSONAL GROWTH
TRAINING – Skill development through on or off-
the-job instructions
CAREER DEVELOPMENT – On-the-job coaching
to develop skills
PERFORMANCE MANAGEMENT – Ongoing goal
setting and feedback to develop skills
IMPLEMENTING A TOTAL REWARDS PROGRAM: THE
(4) FOUR PHASES
-Assessment -Design -Execution -Evaluation
ASSEMBLING THE RIGHT PROJECT TEAM
1. Naming the right Project team
2. Selecting Additional Members
3. Clarifying Team members Role
BENEFITS OF A TOTAL REWARDS STRATEGY:
- Improving the ease of recruitment
- Signaling that you’re a progressive company
- Increasing employee engagement without increasing costs
- Increasing retention rates
PERSONAL AND PROFESSIONAL DEVELOPMENT
Personal and professional development
opportunities such as training, career development,
and performance management can constitute
valuable rewards for employees.
WORK ENVIRONMENT
A positive work environment can be an important
component in an organization’s total rewards
strategy. Work environment includes job design,
recognition, and work/life balance.
JOB DESIGN
Most people think of job design in terms of the
physical characteristics of a work setting, such as
office size. But job design also includes
psychological characteristics in the form of
employee’s perceptions of their work.
WORK/LIFE BALANCE
Turning to compressed workweeks, the
researchers again saw a moderately positive
impact. Compressed workweeks has the largest
positive effect on job satisfaction and the next
largest effect on supervisory performance ratings
RECOGNITION
Most employee recognition systems provide
rewards that are relatively inexpensive compared
to compensation, benefits, and personal and
professional growth
ADVANTAGES OF TOTAL REWARDS PROGRAM:
- Employee Retention
- Employee Performance
- Controllable Expenses
- Program Administration
DISADVANTAGES OF TOTAL REWARDS PROGRAM:
- Lag the Market
- Appropriate Market
- Self-Focus and Competition
- Increasing Employee engagement without increasing costs
- Increasing Retention rates
SIGNIFICANT FACTORS AFFECTING COMPENSATION
IMPORTANT FACTORS:
 Supply and Demand for Employee Skills – The
commodity approach to labor tend to show that a wage is a
price for the services of a worker or employee.
 Labor Organization – Labor unions represent the vital arm
and thus the potent force of labor organizations.
 The Firm’s Financial Condition – Despite the fact that the
company is experiencing strong product sales, other
factors need to be taken into account
 Productivity - Productivity is a measure of the efficiency of
a person in converting inputs into useful outputs.
Cost of Living – The main goal of this increase is to assist
them in overcoming the challenges posed by inflation.
Government – The recognition of the importance of labor
to the nation's economy explains the government's
continued attention and concern to the plight of the
workingman.
Arguments For and Against – A number of arguments
have been marshalled by proponents of a minimum wage
law, ranging from the purely humanitarian or social to the
economic
COMPENSATION PRINCIPLES
1. Principles of Economics - To the company,
compensation is payment to an employee for
service rendered
2. Principles of a Living Wage - The individual's
compensation should be substantial enough that
he can obtain reasonable standard of living.
3. Principles of Competition - Compensation should
provide employees with the means to live
reasonably well among people in the community
who work on a comparable level of employment.
4. Principles of Significant Differences -
Compensation(among other factors) can tell an
individual how well he is appreciated.
 5. Principles of Contribution - Among the basic 3. Personality Traits
human needs are belonging, opportunity, security, 4. Skills and Knowledge
and recognition.
6. Principles of Change - A compensation plan JOB ANALYSIS
cannot attract, hold and motivate competent
employees, if it cannot change in improvements of - Job analysis is a process that is used to identify
its people. responsibilities and tasks, conduct a comparison with
7. Principles of Status Symbolism - Earnings other jobs, establish what education is required, and
provide the individual with yardstick to measure his determine the job's working environment.
place in society.
PURPOSE AND OBJECTIVES OF JOB ANALYSIS:
JOB DESCRIPTION 1. To determine and establish job specification
- A job description is a useful, plain-language tool that 2. To develop training programs
explains the tasks, duties, function and responsibilities of 3. To evaluate positions in the company
a position. 4. To study workflow and work process for improvement
in operations
CONTENTS OF JOB DESCRIPTION 5. To determine safety standards
1. Job Title 6. To aid in determining cost and value benefits of
2. Job Location employee benefits
3. Higher Position the job is tied to 2 categories of benefits:
4. Direction and Supervision given to the job a. Value benefits
5. Specific Duties Performed b. Cost benefits
6. Unrelated Tasks that could be assigned
7. Extent of Job Authority PROCEDURES INVOLVED IN JOB ANALYSIS
8. Working Conditions 1. Gathering a factual material
9. Machinery or Equipment 2. Accuracy of data
10. Others that have a bearing on the job 3. Putting the information in the draft form
4. The data is now made subject to review
GUIDELINES FOR WRITING JOB DESCRIPTION 5. Revision of the first draft
6. Final Approval
1. First and foremost, it should be borne in mind
that job descriptions are nothing more than
summary statement of duties and
responsibilities called in the job and never
intended to serve as a measure of employee
performance.
2. Attention should be focused and directed to two
basic elements:
a. principal duties and responsibilities of job
holder; and
b. accountability for performance of the job
3. Job identification data. This relates to identifying
information about the job such as job title/titles
4. Minimal qualifications necessary for the job must
be clearly indicated. This will help in the
recruitment process
5. The chain of command must be clearly spelled out;
and so with delegation of authority.
6. There should be a periodic review of job
descriptions since job change. The
description should always reflect the nature
and content of the job in question.
JOB SPECIFICATION
- A job specification is an official document which describes
the duties, required knowledge, skills and abilities, and
minimum qualifications of State jobs
COMPONENTS OF JOB SPECIFICATION
1. Educational Qualifications
2. Experience