CHAPTER 07

WAGE AND SALARY

ADMINISTRATION
DIZON, JOHN GABRIEL
FARROL, APRILYN A.
PERDOGAS, MITCH
CHAPTER OUTLINE:

1. Objectives of compensation
2. Main Components of Compensation
3. Wages vs. Salary
4. Determining Pay Rates
5. Establishing Pay Rates
6. Conventional Job Evaluation Methods
7. Assigning Weights to Factor
8. Assigning Points to Specific Jobs
9. Different Forms of Compensation
Objectives of compensation

■ Is the results or rewards that organizations

provide to individuals in return their willingness
to perform various jobs and task with the
organization.

■ Overtime pay, incentives, bonuses, and other

rewards
Compensation Policy (Thomas Patton)

1. Adequate -> to meet the needs of the employees.

2. Equitable -> each person should be paid fairly.
3. Balance -> pay benefits and other rewards.
4. Cost-effective -> taking into consideration the company’s ability to pay.
5. Secure -> employee feel secure and aid him in satisfying basic need.
6. Incentive-providing -> pay should be motivate effective and productive work
or reward desired behavior.
7. Acceptable to the employee -> employee should understand the pay system
being followed by the company.
8. Complies with legal regulation.
Main Components of
Compensation
1. Direct Compensation
1. 1 Wages and salaries
2. Benefits and Perquisites
3. Indirect Compensation
Wages
■ Refers to hourly compensation paid to skilled and unskilled worker
or those performing blue collar job.
Salaries
■ Is income paid to an individual not on the basis of time but on the
basis of performance white collar job
Determining Pay Rate
■ Most wage and salary systems establish pay ranges for certain
jobs based on the relative worth of the job to the organization .
Basic determinants of pay
I. External Factors
A. Market factors
– Supply and demand for labor
– Economic conditions and unemployment.
B. Existing pay level in the community
C. Government regulations and law, minimum wage law.
– REPUBLIC ACT No. 602
– AN ACT TO ESTABLISH A MINIMUM WAGE LAW, AND FOR OTHER PURPOSES
– (REPEALED BY PRESIDENTIAL DECREE NO. 442)
II. Organizational Factors
A. Type of industry
B. Profitability and company’s ability to pay
C. Unionized or non-unionized
D. Size of the company
E. Capital or labor intensive
F. Value of the job-contribution to the company
III. Job Factors
A. Skill
1. Mental requirements
2. Complexity of duties
3. Personal qualifications needed
4. Ability to make decision, judgments
5. Preparation for the job – education, training, and knowledge
6. Previous experience
B. Responsibility
7. Money, commitments
8. Decision making
9. Supervision – work of others
10. Quality of work
11. Materials, equipment, property
12. Confidential information
C. Effort
1. Physical and mental effort required
2. Attention to details
3. Pressure of work
D. Working condition
4. Job condition
5. Physical hazard
IV. Individual Factors
A. Performance, productivity
B. Experience
C. Seniority, length of service
D. Potential, promotability
Establishing Pay Rates
1. Conduct the salary survey
1. Price benchmark jobs (key job)
2. Majority of the position found in the company are usually priced directly in
the marketplace.
3. To collect data on benefits so as to provide a basis on which to make
decisions regarding employee benefits .
2. Determining the worth of each job through job Evaluation
“Job evaluation is a systematic and orderly process of determining the worth of
a job in relation to other jobs.“ - Edwin B. Flippo
Job evaluation aims to determine a job’s relative worth. The basic principle of
job evaluation is this: Jobs that require greater qualifications, more
responsibilities, and more complex job duties should receive more pay than
jobs with lesser requirements.