Lesson 5

CompensatioN/
Wages
and
Performance
Evaluation
 Definition of Terms
Compensation/Wages Performance Evaluation
all forms of pay given a process undertaken by
by employers to their the organization, usually
employees for the done once a year,
performance of their designed to measure
jobs. employees work
performance.
Compensation/wages and performance
evaluation are related to each other because the
employee's excellent/poor performance also
determines the compensation given to them,
after considering other internal and external
factors like the actual worth of the job,
compensation strategy of the organization,
conditions of the labor market, cost of living
and area wage rates among others.
 Types Of Compensation
Direct Compensation
• includes worker's salaries, incentive pays, bonuses and
commissions.
Medical
Reimbursement
Special
Basic Salary
Allowances

DIRECT
COMPENSATION
House Rent
Allowances Bonus

Leave Travel
Convenyance
Allowances
 Types Of Compensation
Indirect Compensation
• includes benefits given by employers other than financial
remunerations; for example: travel, educational and health
benefits and others.
Overtime
Hospitalization
Policy
Leave
Policy
Insurance
INDIRECT
COMPENSATION
Flexible
Timings Leave
Travel
Holiday Retirement
Homes Benefits
 Types Of Compensation
Non-financial Compensation
• includes recognition programs, being assigned to do rewarding
jobs/enjoying management support, ideal work environment and
convenient work hours.
Service
Quality

Promotion Recognition

DIRECT
COMPENSATION Materials
Customer
Satisfaction Effeciency

Labor
Job Security
Effeciency
 Bases for Compensation
Employees may be compensated based on the following:
 Piecework basis - when pay is computed according to
the number of units produced.
 Hourly Basis - when pay is computed according to
the number of hours rendered.
 Daily Basis - when pay is computed according to the
number of days rendered.
 Weekly Basis - when pay is computed according to
the number of weeks rendered.
 Monthly Basis - when pay is computed according to
the number of months rendered.
Compensation rates are influenced by internal and
external factors.

Internal factors are the organizations compensation

policies, the importance of the job, the employee's
qualifications in meeting the job requirements and
the employer's financial stability.

External factors - include local and global market

conditions, labor supply, area or regional wage
rates, cost of living, collective bargaining
agreements and national and international laws,
among others.
Why Some Evaluation Programs Fail?

Performance appraisals (such as manager /

supervisor appraisal, self-appraisal, subordinate
appraisal, customer appraisal, peer appraisal, team
appraisal or 360-degree appraisal) may sometimes
fail due to various reasons including the following.
 incomplete cooperation of
the evaluatees (e.g. proper
answering of evaluation
questionnaire)

inadequate orientation of
the evaluatees regarding
the objectives of the
bias exhibited by
program Performance evaluators
appraisals fail
because…

inadequate time for ambiguous language

answering the evaluation used in the evaluation
forms questionnaire
 employee's job description
is not properly evaluated by
the evaluation
questionnaire used

inflated ratings resulting

from evaluator's evaluator's appraisal is
avoidance of giving low focused on the
scores Performance personality of the
appraisals fail evaluatee and not
because… his/her performance

evaluator may be
unhealthy personality of
influenced by
the evaluator
organizational politics
 Chanimae C. Arrogante

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ABM XI