HUMAN RESOURCE

MANAGEMENT
“FIRMS DON’T CHANGE.
PEOPLE DO, AND IT IS PEOPLE
WHO CHANGE
ORGANIZATIONS.”
 “The major challenge for HR in the future is not
reducing its cost or increasing administrative efficiency.
Why? The HR function typically accounts for less than 1
percent of a firm’s total expenditures… HR cannot save
enough to make a real difference in the firm’s economics.
But HR can… if it facilitates the development of a
workforce that delivers-executes the firm’s business
strategy.”
HRM
- art and science of acquiring, motivating,
maintaining, and developing people in their
jobs in light of their personal, professional, and
technical knowledge, skills, potentialities,
needs and values and in synchronization with
the achievement of individual, organization,
and society’s goal.
Central Functions of HRM
1. Staffing
2. Training and Development
3. Motivation
4. Maintenance
Staffing
- refers to the function which locates competent
employees and getting them to work for the
organization.

Activities:
1. Strategic Human Resource Planning
2. Recruitment
3. Selection
page 4
Training and Development

- acquisition of skill's, knowledge, and attitudes which

enable people to achieve their current and future
individual and corporate objectives.

Training- process concerned with establishing what

type of training is required and who should receive it.

Development- concerned with improving the

intellectual or emotional abilities of an employee for
the purpose of doing a better job.
Motivation
- process of activating behavior, sustaining it,
and directing it towards a particular goal.

Activities:
1. Activities and Job Design
2. Performance Evaluation
3. Rewards and Compensation
4. Employee Benefits
Maintenance
- insures employee retention and motivation
for more and better productivity.

Activities:
1. Safety
2. Health
3. Communication Programs
External Environment of HRM

1. Economic Forces
2. Government Legislation
3. Advances in Technology
4. Labor Unions
5. Management Thought
Factors in Organizing HRM Department

1. Available Resources
2. Number of Company Employees
3. Philosophy of Management
 Owner/Manager

Worker Worker Worker

HRM in a Small Organization

 Manager

HRM Assistant

Supervisor Supervisor Supervisor

HRM in a Growing Organization

 Vice President
Human Resource

HRM Assistant

Manager of Training and Development Manager of Employee and Labor Relations

> Training Specialist > Personnel Assistant

Manager of Human Resources Planning and

Editor of Employee Communications
Staffing
>Publications Correspondent
> Employment Representatives
> Publications Technician
> Receptionist
Manager of Compensation and Benefits
Manager of Loss Prevention
> Benefits Supervisor > Security Officers
> Insurance Clerk > Insurance Analyst
> Compensation Analyst > Secretary

HRM in a Large Organization

Human Resource Principles
1. Build and implement an HRM strategy
- develop a shared philosophy for
managing people
- build systems and practices to
implement the philosophy
2. Hire the right people
- know what you want
- be selective
3. Keep them
- reward well
- protect jobs
- promote from within
- share the wealth
4. Invest and Empower them
- invest in learning
- provide information and support
- encourage autonomy and participation
- redesign work
- foster self-managing teams
5. Promote diversity
- be explicit and consistent about the
organization’s diversity philosophy
- hold managers accountable
New Role of HR
1. Strategic Partner
- knowledgeable about the design of
work systems in which people succeed
and contribute
2. Employee Advocate
- expertise in how to create work
environment in which people can be
motivated, productive, and happy
New Role of HR
3. Change Champion
- HR must be parallel with the needs of
his changing organization
4. Harness the benefits of technology
- automation of programs and activities
to save time
Skills for an Effective HRM
1. Human Relations or Interpersonal
- must consider the feelings, values, and
behavioral attitudes of the human
resource
2. Multitasking
- dealing with more tasks in a day
3. Organization
- HRM is the paragon of orderly and
seamless organization, well-organized,
strong time management skills, and
personal efficiency
Skills for an Effective HRM
4. Ability for dual focus
- consider the needs booth employees and

management
5. Trust and confidence
- custodian of all personnel records
including salaries and benefits
6. Dedication to continuous improvement
- continue to train managers how to coach

and develop employees

- HR is sensitive of his own deficiencies
and make corrective measures
Human Resource Planning

- process by which management ensures that it

has the right personnel who are capable of
completing those tasks that help the
organization reach its objectives
 Building the Workforce
The ORGANIZATION

ATTRACT RETAIN ENGAGE

HUMAN RESOURCE MANAGEMENT

JOIN STAY PERFORM

The INDIVIDUAL

2
 HR Planning Process
An al yzing Fore casting Pl ann ing Implementing

Environmental
Factors
Human Strategic
Demand Resource Changes
Organizational Employee
Direction Process
and Development
Changes
Internal
Finance and
Operational
Workforce Supply Budgets
Changes
External Logistical Evaluation
Workforce
and Feedback2
HR Planning Process
Step 1. Analyzing
- analyze the environmental factors that
causes impact on the labor demand.
Guide Questions:
a. How many staff do we have?
b. How are they distributed?
c. What is the age profile?
d. How many will leave by resignation or
retirement in each of the next five years?
E. What are the present skills of the present
workforce? What new skills will be
required?
HR Planning Process
Step 2. Forecasting
- determining the future demand
- turnover rate is a very important factor
to be considered in internal manpower
supply.
2 kinds of turnover:
1. Resignation
2. Dismissal
HR Planning Process

Resignation can be due to:

1.) Accepting job elsewhere
2.) Poor Health
3.) Putting one’s own business, taking further
studies or raising a family
4.) Migrating abroad
5.) Accepting voluntary retrenchment
6.) Relocating to another place
HR Planning Process

Dismissal can be due to:

1.) Misconduct
2.) Forcible resignation due to poor
performance
3.) Authorized causes under the law
HR Planning Process

Exit Interview
- determine and tally real causes of
resignations for remedial purposes
- only resignation undergo the process of
exit interview while dismissal are not
HR Planning Process

Forecasting:
1. Assessment of the Internal Labor Supply
2. Assessment of the External Labor Supply
3. Employing temporary Workers
HR Planning Process

Forecasting:
Assessment of the Internal Labor Supply

Turnover Formula:

Number of staff leaving in a year

___________________________________ x 100%
Average number employed in a year

Wastage Index = quotient

HR Planning Process

Alternative Turnover Formula:

Number of employees with one

year service at 31 December
___________________________________ x 100%
Number employed one year ago

Stability Index = alternative calculation stated

in a positive manner
HR Planning Process

Forecasting:
Assessment of the External Labor Supply
- unemployment rate of the country
- abundance of manpower in the labor
market but only a handful are chosen for

lack of the necessary skills and

competencies required of the job
HR Planning Process

Forecasting:
Employing Temporary Workers
- temporary workers categories:
1.) casuals
2.) project employees
3.) fixed term employees
- outsourcing of employees
 “Business strategy focuses on how the firm
creates its competitive advantage – how it differentiates
itself in its marketplace.” The strategic choices in this
regard can be: product leadership, operational
excellence and customer intimacy.
 HR strategy involves the design and operation of
practices meant for the selection, development,
performance management and rewards/recognition of
the right human resource.
 Workforce strategy involves the proper movement
of the best people to the key positions. The workforce
must be internally differentiated, with the best strategic
players in the best strategic positions; one that can
deliver the business strategy externally.
Consider:

a. The right workforce philosophy – a system of

governance for decision making with respect to the
workforce by both line managers and HR;
b. The right workforce allocation – headcount at
various levels and functions;

c. Alignment – objectives, priorities and interactions;

d. Cost Structure – compensation.

 To win in the future, a firm may need different
strategic capabilities. Following Ulrich and Smallwood
(2004), these refer to those bundles of information,
technology and people that create a firm’s competitive
advantage, not an individual’s competencies. The
leadership should identify those strategic capabilities
required to execute strategy, (the) level of performance
on each to determine what competitive advantages it
has.
Rightsizing Approaches:

- Outsourcing of Non-Core/Collateral Functions

- Restructuring and Redundancy Programs

 Art. 106 of the Labor Code recognizes a situation
when “an employer enters into a contract with another
person for the performance of the former’s work.”
 In Aboitiz Haulers vs. Dimapatoi[4], the
Supreme Court held:

“The first two paragraphs of Art. 106 set the

general rule that a principal is permitted by law to
engage the services of a contractor for the performance
of a particular job, but the principal, nevertheless,
becomes solidarily liable with the contractor for the
wages of the contractor's employees. The third
paragraph of Art. 106, however, empowers the
Secretary of Labor to make distinctions between
permissible job contracting and "labor-only"
contracting, which is a prohibited act further defined
under the last paragraph.”

[4] G.R. No. 148619, 29 September 2006.

 In De Ocampo vs. National Labor Relations
Commission[5] upheld the termination of employment of three
(3) mechanics in a transportation company and their
replacement by a company rendering maintenance and repair
services. The Court held that an employer’s good faith in
implementing a redundancy program is not necessarily
destroyed by availment of the services of an independent
contractor to replace the services of the separated employees.
The reduction of the number of workers in a company made
necessary by the introduction of the services of an independent
contractor is justified when the latter is undertaken in order to
effectuate more economic and efficient methods of production.

[5] 213 SCRA 652; See also Asian Alcohol Corporation vs. National Labor Relations Commission, 305 SCRA 416.
 In Regina Astorga vs. Smart Communications, Inc.,
et al[6], the Supreme Court again upheld an employer’s
prerogative to resort to outsourcing when it upheld the
redundancy of a District Sales Manager arising from
Smart’s reorganization which included the “outsourcing of
the marketing and sales force” to a joint venture company.
The Court acknowledged the employer’s right “to
reasonable returns for his investment” and his prerogative
“to adopt such measures as will promote greater efficiency,
reduce overhead costs and enhance prospects of economic
gains”.

[6] 542 SCRA 434, 28 January 2008.

The Independent Contractor Test
1. The Contractor carries on an independent business
and undertakes the contract work on his own account
and under his own responsibility according to his own
manner and method, free from the control and direction
of his employer or principal in all matters connected with
the performance of work, except as to the results thereof;
and

2. The contractor has substantial capital or investment

in the form of tools, equipment, machineries, work
premises and other materials, which are necessary in the
conduct of his business.
 In Manila Water Company, Inc. vs. Peña, et al.
[7], the Supreme Court ruled that:

“Job contracting is permissible only if the following

conditions are met: 1) the contractor carries on an
independent business and undertakes the contract work on
his own account under his own responsibility according to
his own manner and method, free from the control and
direction of his employer or principal in all matters
connected with the performance of the work except as to
the results thereof; and 2) the contractor has substantial
capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are
necessary in the conduct of the business.”

[7] G.R. No. 158255, 8 July 2004.

 Separation for Authorized Causes
(Article 283, Labor Code)

The employer may also terminate the employment of any

employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a
written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof.
In case of termination due to the installation of labor-saving devices
or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher.
In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year
  Separation for Authorized Cause
Requisites:
a. Done in good faith;
b. Purpose - to save on cost, enhance efficiency and
other justifiable economic/business reasons;
c. No other option available, in the case of
retrenchment, to prevent actual/imminent losses;
d. Written notice to employees and DOLE at least 1
month before termination;
e. Fair and reasonable standards or criteria in
selection of employees covered, where applicable;
and
f. Separation pay.
Separation Pay

In termination for authorized cause under Article 283 of

the Labor Code, there is a requirement for the Payment
of Separation Pay of not less than one (1) month pay, or
the following, whichever is higher:

For labor saving devices or redundancy – one (1)

month pay for every year of service

For retrenchment and cessation of operations (not due

to serious business reverses) – one half (1/2) month
pay for every year of service
 Redundancy

Services of an employee are in excess of what is

reasonably demanded by the actual requirements of the
business.
 
Possible factors: over-hiring of workers, decreased
volume of business, dropping of a particular
product line or service activity previously manufactured
or undertaken by the employer
Requisites for redundancy:

a. Written notice to employees and DOLE at least one

(1) month before termination;
 
b. Separation pay (at least 1 month pay for every year
of service or at least one (1) month pay, whichever
is higher);
 
c. Good faith;
d. Fair and reasonable criteria in ascertaining what
positions are to declared redundant and accordingly
abolished. (Asian Alcohol Corp. vs. NLRC, et al., G.R.
No. 131108, 25 March 1999)
Retrenchment

Termination of employment to avoid serious losses,

during business recession, industrial depression,
seasonal fluctuations, lack of work or considerable
reduction in the volume of the employer’s business.
(Bogo-Medellin Sugarcane Planters Association, Inc., et al.,
vs. NLRC, et al., G.R. No. 97846, 25 September 1998)
Requisites for Retrenchment:

a. Reasonably necessary and likely to prevent

business losses which, if already incurred, are not
merely de minimis but substantial, serious, actual
and real, or if only expected, are reasonably
imminent as perceived objectively and in good faith
by the employer;
 
b. Written notice to employees and DOLE at least 1
month before intended date of retrenchment; 
 c. Separation pay (At least 1 month pay for every year
of service or at least one (1) month pay, whichever is
higher);
 
d. Good faith;

e. Fair and reasonable criteria in selection of affected

employees. (Sebuguero, et al. vs. NLRC, et al., G.R.
No. 115394, 27 September 1995; Asian Alcohol Corp.
vs. NLRC, et al., G.R. No. 131108, 25 March 1999)
Closure or Cessation of Business
Requisites:
a. Decision to close or cease operations made in good
faith;
 
b. Purpose - not to circumvent employees’ right to
security of tenure;
c. Separation pay (when not due to serious
business losses, equivalent to at least 1 month pay
or to at least 1/2 month’s pay for every year of
service, whichever is higher);  
d. Written notice to employees and DOLE at least 1
month before intended date of closure; and

e. No other option available. (Catatista, et al. vs.

NLRC, et al., G.R. No. 102422, 03 August 1995)
Illustrative Cases
Redundancy and Retrenchment (Authorized Causes)

In the case of AMA Computer College v. Garcia, G.R. No.

166703, 14 April 2008, the Supreme Court ruled:
The determination that the employee’s services are no
longer necessary or sustainable and, therefore, properly
terminable for being redundant is an exercise of business
judgment of the employer.  The wisdom or soundness of this
judgment is not subject to discretionary review of the Labor
Arbiter and the NLRC, provided there is no violation of law
and no showing that it was prompted by an arbitrary or
malicious act.  In other words, it is not enough for a
company to merely declare that it has become overmanned. 
It must produce adequate proof of such redundancy to
justify the dismissal of the affected employees.
Granting that ACC was able to substantiate the need for
streamlining its organization, it still failed to implement the
same using fair and reasonable criteria for choosing which
employees to dismiss.  Among the accepted criteria in
implementing a redundancy are: (a) less preferred status, e.g.,
temporary employee; (b) efficiency; and (c) seniority.  There is
no showing that ACC applied any of these criteria in
determining that, among its employees, Garcia and Balla, who
occupied the positions of janitress and social worker, should be
dismissed, thus, making their dismissal arbitrary and illegal.
Retrenchment, on the other hand, is the termination of
employment effected by management during periods of
business recession, industrial depression, seasonal fluctuations,
lack of work or considerable reduction in the volume of the
employer’s business.  Resorted to by an employer to avoid or
minimize business losses, it is a management prerogative
consistently recognized by this Court.
There are three basic requisites for a valid retrenchment
to exist, to wit: (a) the retrenchment is necessary to
prevent losses and such losses are proven; (b) written
notice to the employees and to the DOLE at least one (1)
month prior to the intended date of retrenchment; and
(c) payment of separation pay equivalent to one (1)
month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher.
To justify retrenchment, the employer must prove
serious business losses.  Indeed, not all business losses
suffered by the employer would justify retrenchment
under Article 283 of the Labor Code.  The “loss” referred
to in Article 283 cannot be just any kind or amount of
loss; otherwise, a company could easily feign excuses to
suit its whims and prejudices or to rid itself of unwanted
employees.
In a number of cases, the Court has identified the
necessary conditions for the company losses to justify
retrenchment: (1) the losses incurred are substantial and
not de minimis; (2) the losses are actual or reasonably
imminent; (3) the retrenchment is reasonably necessary
and is likely to be effective in preventing the expected
losses; and (d) the alleged losses, if already incurred, or
the expected imminent losses sought to be forestalled, are
proven by sufficient and convincing evidence.  ACC
miserably failed to prove any of the foregoing.
In the case at bar, ACC claimed that the retrenchment of
Garcia and Balla was justified due to the financial
difficulties experienced by the college that it was made
effective in all of its campuses and for all departments;
and appropriate notices were given to Garcia and Balla. 
But other than its bare allegations, ACC failed to present
any supporting evidence.
 The Supreme Court recognized that an employer has
management prerogatives, which allow him to regulate,
except as may be limited by special laws or contract, all
aspects of employment including:

- The abolition of redundant units or positions;

- The streamlining of operations so as to make

them more viable;
 - The transfer/merger/consolidation/centralization
of functions;

- The redefinition of job functions and reporting

relationships; and

- The outsourcing of functions whether or not these

have been previously performed by regular
employees;

provided the same is pursued in good faith for a

legitimate business purpose and not meant to circumvent
any provision of the Labor Code or special law.