POLICIES, PRINCIPLES,

AND PROBLEMS IN
COMPENSATION
ADMINISTRATION.

Reference: Human Resources Management By: Snell & Bohlander

TOPICS TO BE TAKEN:

• General policies in salary administration.

• Principles considered in salary
administration.
• Problems in salary administration.
INTRODUCTION:
Compensation administration is the most sensitive among
all functions of the HR department. The pay and benefits
you, as an employee, receive are a
yardstick of how adequately the company is willing
to meet your needs.

Another name of compensation administration is salary

administration.
 Different companies have different policies
regarding their salary administration.

• Normally all jobs in the organization are classified

into various pay classes; that is to say, a pay class
for each job.
• A minimum and a maximum salary for each class has
been fixed and established in accordance with the
Job Classification.
• All salary increases are in accordance with the
graduated steps in the pay class and within the salary
range for the pay class occupied by the employee.
Company’s reward philosophy and
reward system
• Intrinsic reward

• Extrinsic reward
Intrinsic reward
Which include:

• Employee empowerment and greater participation

in decision making
• More responsibility
• Interesting and challenging work and;
• Opportunities for personal growth
Extrinsic reward
Subdivided into:

1.Direct compensation
2.Indirect compensation
3.Non-financial compensation
 Extrinsic reward
1. Direct compensation
• Basic salary
• Overtime and holiday
pay
• Performance bonus
• Profit sharing or stock
option
• Pension and retirement
pay
• And others
2. Indirect compensation
• Insurance and tenures
• Scholarship, tuition refunds,
bus services, gasoline
allowance, housing, rice
supply, uniform allowance,
counseling, recreational
membership and legal
services
• Fringe benefits
 Extrinsic reward
3. Non-financial compensation
Is usually rewarded to officers, and it takes
the form of assigned parking, assigned
administrative assistant, and prestigious
titles.
GENERAL POLICIES IN
COMPENSATION
ADMINISTRATION
General policies in compensation administration

 Are contingent to innovative ingenuity of

the HR executives and the availability of
funds of the company.
Salary Structure for 2002-2003/Guthrie-Jensen Consultants, Inc.

Level 1 – Jobs that are highly manual, which involve little skills and
more of physical exertion. Jobs classified are: Typing, filling and
other clerical works, messengerial, collecting, janitorial and driving.
Salary range Hiring rate: ________ and permanent rate: _________
Succeeding increases:
a. 5 to 10% increase every year
b. 15 to 20% increase depending on performance
c. Adjustment depending on wage order
Salary Structure for 2002-2003/Guthrie-Jensen Consultants, Inc.

Level 2 – Jobs that involve skill but require a little planning and
organizing. Jobs classified are: Stock and inventory maintenance,
encoding, secretarial, purchasing.
Salary range Hiring rate: ________ and permanent rate_________.
Succeeding increases:
a. 5 to 10% increase every year
b. 15 to 20% increase depending on performance
c. Adjustment depending on wage order
Salary Structure for 2002-2003/Guthrie-Jensen Consultants, Inc.

Level 3 – Jobs that involve talking to clients, coordinating, collecting

data, little decision-making and a great deal or report writing. Job
classified are: Telemarketing, research assistant, executive secretary.
Salary range Hiring rate: ________ and permanent rate: ________
Succeeding increases:
a. 5 to 10% increase every year
b. 15 to 20% increase depending on performance
c. Adjustment depending on wage order
Level 4 – Supervisor level
Level 5 – Managerial level/Consultants
Level 6 – Executive level/Partners
Salary increases
Models of general policies in salary administration:

1. Merit increase

2. Promotional increase
Procedure in salary increases

1. Annual review

2. Special review
Job movement and salary administration
• Upward movement
(promotion)

• Lateral movement
(transfer)

• Outward movement
(change job, resignation, layoff, retirement, discharge)

• Downward movement
(demotion)
 PRINCIPLES
CONSIDERED IN SALARY
ADMINISTRATION
Principles considered in salary administration

1. “Equal pay for equal work”

2. “A fair day’s pay for a fair day’s work”

3. “Incentive pay for extra effort”

 PROBLEMS IN
SALARY
ADMINISTRATION
Problems in salary administration
• The difficulty in determining what is an adequate and fair
pay for a particular job.

• The utmost desire of the employees to earn more money

and simultaneously of management to operate and greater
profit.

• Employees are not satisfied with what they receive and

they continuously agitate for higher salaries and benefits in
order to improve their living standard.
Problems in salary administration
• Employers’ perennial concern to keep the operating costs as
low as possible so that they could offer their products or
services within the reach of consumers.
• Employers were right to keep the operating costs as low as
possible. Employees were right to demand for an increase in
wage due to the price hike of the basic commodities.
• The lack of sound pay policy.

• The absence of a written policy and clear guide in determining

the wage levels
SOUND COMPENSATION
POLICY IS IMPERATIVE
Sounds compensation policy is imperative

1. When the pay policy is clearly spelled out

2. When the policy is uniformly and consistently
implemented
3. When it is flexible enough to meet economic
contingencies.
4. When the wage policy has in-built safeguards
5. The policy has to be properly disseminated
and made known to all.