CHAPTER 11:

COMPENSATION
AND BENEFITS
 COMPENSATION AND BENEFITS

A major factor in keeping skilled workers is an organization’s

compensation package system, and what it gives employees in
exchange for their services. Compensation and Benefits in HRM refer to
the salary, monetary, and as well as non-monetary privileges provided to
the employees at the workplace by the organization. It is a primary tool
of the Human Resource Managers to bring out the best potential of the
employees in their work
WHAT IS
COMPENSATION
AND BENEFITS
A Compensation is an organized system that provides
monetary compensation to employees in exchange for
work performance.
Benefit refers to the form of compensation paid by
employers over and above regular salary or wages.
 MULTIPLE OBJECTIVES ARE
ASSOCIATED WITH COMPENSATION
AND BENEFITS.
1. Control the incurring costs of the organization.
2. Follow the labor laws or wage system by acknowledging the legal provisions To bring an easy
understanding of salary structure and other benefits by the staff of the company.
3. To enhance the overall motivation of an employee.
4. To improve the comprehensive company’s ranking on social platforms in terms of employee
motivation and satisfaction.
5. Competent compensation for reinforcing the reward winning behavior Balance in pay structure
also helps in attracting the right and creative talent.
6. Long Term Retention of the employee.
7. Payment must meet the employees’ overall needs and expectations in return for the work done.
 WAGES AND SALARIES

In setting wage and salary levels, a company must consider several

factors.First it must take into account how its competitors compensate their
employees. A firm that pays less than its rivals may soon find itself losing
valuable personnel.The issue about compensation should be a top concern
for a company.It must take into account how it wishes to remunerate its
employees and explain to employees how salaries and wages are determined
to make a productive workforce.
WHAT IS WAGES
AND SALARIES
Wages and salaries are key parts of any compensation system,
but most systems also include features such as incentives and
employee benefit programs.
INCENTIVE PROGRAMS
• Sales bonuses are a typical incentive. Under such a
program, employees who sell a certain number or amount of
goods for the year receive a special payment
• Companies may offer incentive plans to all their employees.
Gain-sharing incentives distribute bonuses to all employees
in a company based on reduced costs from working more
efficiently.
• Profit-sharing plans are based on the company's profitability
level, Profits acquired over and above a specific quota are
shared with employees.
INCENTIVE
PROGRAMS
The term incentive program refers to an
official monetary plan designed to motivate and
recognize employees' performance. The use of
incentive programs increased in the 1980s,
largely because of concerns over productivity.
5 best practices for employee incentive programs

• Make your program inclusive

• Promote your incentive programs

• Have leaders show the way

• Personalize your incentives

• Ask for feedback

What are common incentive mistakes?

• Launching a plan without input

• Failing to communicate or be consistent

• Being inflexible

• Offering one type of reward

COMPARABLE WORTH
Comparable worth is a legal principle or concept stating
that regardless of sex, employees should be compensated
equally for jobs involving the same degree of skills,
responsibilities, and effort performed on the job.
• Comparable worth, more commonly known as “pay equity,” is a way
for companies to set employee salaries by ranking the value of
comparable skills and responsibilities across professions, regardless of
sex.
• Comparable worth focuses on the worth that a position has to a
company. This means that two very different professions within one
organization could be found to have the same value.
 Mandatory Benefits and
Provisions for Employees in
the Philippines
1. Social Security System (SSS)
• A government-mandated insurance program that
provides benefits to employees in the event of
disability, sickness, retirement, or death. Its
purpose is to provide social protection to
workers in the private sector.
 Benefits under the SSS include:
Sickness Benefits
Retirement Benefits
• cash allowance paid for the number
• cash benefit granted, either as a
of days a member is unable to work
monthly pension or a lump sum
due to sickness or injury.
amount, to a member who can no
longer work due to old age.
Maternity Benefits
Death Benefits
• cash allowance granted to a female
• cash benefit granted, either as a
member who is unable to work due
monthly pension or a lump sum
to childbirth or miscarriage
amount, to the beneficiaries of a
Disability Benefits deceased member.
• cash benefit granted, either as a
In addition, some members who are qualified
monthly pension or a lump sum
can also avail of salary, housing, business, and
amount, to a member who becomes
educational loans.
permanently disabled.
 People who are required to become members of
SSS are as follows:
• private sector
• household helps
• employees of foreign governments based in the Philippines
• public utility drivers and operators
• self-employed persons
• farmers
• fishermen
• workers in the informal sector
• overseas Filipino workers

People who can be voluntary members of SSS

are as follows:
• non-working spouse of an SSS member
• members who are separated from employment
2. PhilHealth
• Another government-mandated insurance program
that provides medical services and hospitalization
to employees and their dependents of the
Philippines. The purpose of PhilHealth is to ensure
that all Filipinos have access to affordable and
quality healthcare services.
Benefits under PhilHealth include:
• inpatient hospital care
• outpatient care
• maternity care
• preventive health care.

PhilHealth members receive financial

assistance for:
• medicine
• hospital costs
• and certain inpatient and outpatient procedures.
3. Pag-IBIG Fund
• Also known as the Home Development Mutual
Fund, is a government program that provides
national savings, housing assistance programs
and other benefits to employees. The Pag-IBIG
Fund was created to help employees save money
for their housing needs. Employers must
contribute to Pag-IBIG on behalf of their
employees.
Benefits under the Pag-IBIG Fund:

• housing loans - allows employees to borrow money from

Pag-IBIG to purchase a home or lot
• short-term loans - allows employees to borrow money for
various purposes such as education, home improvement, or
emergencies.
• savings programs - provides employees with a savings
account that earns interest.
4. 13th-month pay
• A mandatory benefit that employers must pay to their
employees. It is equivalent to one month's salary and
is usually paid in December.
• A form of bonus that is given to employees to help
them with their expenses during the holiday season.
5. Vacation and sick leave
• Employers are required to provide their employees with a
certain number of vacation and sick leave days each year.
The exact number of days varies depending on the length
of service of the employee.
• Employees who have worked for at least one year are
entitled to five days of paid vacation leave. Employees
who have worked for at least ten years are entitled to 15
days of paid vacation leave.
• Sick leave
⚬ granted to employees who are unable to work due to
illness. Employees are entitled to a maximum of 15
days of paid sick leave per year. However, if the
employee is hospitalized, they are entitled to an
additional 15 days of paid sick leave.
6. Maternity leave and Paternity leave
• Female employees are entitled to maternity leave of 105
days with pay for the first four deliveries and miscarriages.
The maternity leave may be extended to 120 days for a
woman who underwent a caesarian section delivery. The
maternity leave benefits can also be availed of by solo
parents and adoptive parents.
• Male employees may also avail of paternity leave for seven
days. The paternity leave can be availed of within the 60-day
period after childbirth or the miscarriage.
7. Retirement Benefits
• Another essential employee benefit under Philippine labor
laws. Employers are required to provide their employees with
retirement benefits once they have reached retirement age or
have been employed for a specific number of years. The
retirement age in the Philippines is 60 years old.
7. Retirement Benefits
• Retirement benefits are provided to ensure that employees
can support themselves after they retire from their job.
Retirement benefits can come in the form of a lump sum
payment or a monthly pension. The exact amount of
retirement benefits that an employee is entitled to receive
depends on various factors, such as the employee's length of
service and their average monthly salary.
8. Special Leave Benefits
• Philippine labor laws also provide for special leave benefits.
These benefits are designed to help employees cope with
specific situations that may require them to take time off
work.
• Examples of special leave benefits include parental leave,
solo parent leave, leave for victims of violence against
women and children, and leave for women who underwent
surgery resulting in infertility.
8. Special Leave Benefits
• To avail of these special leave benefits, employees must
meet specific requirements and provide the necessary
documentation to their employer. The length of the leave and
the benefits provided will depend on the specific situation and
the requirements set forth by Philippine labor laws.
9. Regular Holiday Pay
• Also known as legal holidays, are recognized nationwide and
paid regardless of whether an employee works on that day or
not.
• If the employee does not work, the employer shall pay 100%
of the employee’s wage for that day, provided that the
employee reports to work or is on leave of absence with pay
on the day immediately preceding the regular holiday.
9. Regular Holiday Pay
• For work done during the regular holiday, the employer shall
pay a total of 200% of the employee’s wage for that day for
the first eight hours. While a work done in excess of eight
hours, the employer shall pay an additional 30% of the
hourly rate on the said day.
• January 1, April 6, April 7, April 10, May 1, June 12, August
28, November 27, December 25, December 30, Eidul Fitr,
Eidul Adha.
10. Special Non-Working Holidays
• determined by local government units or specific industries
and may or may not be paid depending on the employer's
policy.
• If the employee does not work, the “no work, no pay”
principle shall apply unless there is a favorable company
policy, practice or collective bargaining agreement granting
payment on a special day.
11. Service Incentive Leave
• Also known as leave credits, is an employee benefit that enables
them to take or avail of leave with pay for five days provided the
worker has rendered service for at least one year
• According to Article 95 of the Labor Code, employers must give their
employees a yearly service incentive leave of five days with pay.
This should be granted to employees who have been in service
within 12 months, whether continuous or broken, reckoned from the
date the employee started working, including authorized absences
and paid regular holidays.
 LAWS ON WAGES AND WORKING
HOURS IN THE PHILIPPINES

I. RIGHTS OF WORKERS WITH REGARDS TO

WAGES:
Workers have the right to receive a fair
and just wage for their labor.
- This recognizes the intrinsic value of human
effort and ensures that workers are
compensated adequately for the work they
contribute to society. Fair compensation not
only acknowledges the worker's contribution
but also promotes social and economic
justice.
Wages should be paid promptly, in cash,
and in legal tender.
- This means that employers are obliged to
ensure that their employees are paid in a timely
manner, typically according to agreed-upon
pay periods. This right ensures that workers
can meet their financial obligations and
maintain a reasonable standard of living
without undue delay or inconvenience.
Deductions from wages must be authorized by law or
the worker's written consent.
- While employers have a legitimate interest in making
certain deductions from employee wages (such as taxes or
social security contributions), these deductions must be
authorized either by law or with the worker's explicit,
written consent.

Discrimination in wage rates based on gender is

prohibited.
- This principle is rooted in the pursuit of gender
equality and the recognition that everyone,
regardless of their gender, deserves equal pay for
equal work.
 LAWS ON WAGES AND WORKING
HOURS IN THE PHILIPPINES

II. RIGHTS OF WORKERS WITH REGARDS TO REST,

WORKING HOURS, AND HOLIDAYS:

The standard working hours should not

Workers are entitled to reasonable
exceed eight hours per day, 48 hours per
rest periods and breaks during week.
working hours. - To prevent overwork and burnout, there

- Adequate rest and breaks can
enhance productivity, reduce
workplace stress, and contribute to a
safer work environment.
are established limits on standard working
hours. Such limits are designed to strike a
balance between an individual's work
commitments and their personal lives,
fostering a healthier work-life equilibrium.
 Overtime work should be compensated.
- It serves both as a financial incentive for employees
to take on additional tasks when needed and as a
safeguard against excessive working hours becoming
the norm.
Workers have the right to a weekly rest day,
typically Sunday.
- This day of rest allows employees to spend quality
time with their families, pursue personal interests,
and recharge for the work week ahead. The weekly
rest day is not just a legal requirement; it's a
recognition of the importance of leisure, family, and
community in a worker's life.
LAWS ON WAGES AND WORKING
HOURS IN THE PHILIPPINES

III. THE PHILIPPINE LABOR LAW:

The Philippine Labor Code (Presidential Decree No. 442) is

the primary legislation governing labor relations in the
Philippines. It covers a wide range of topics including
employment, wages, working conditions, termination, and
labor standards.
 LAWS ON WAGES AND WORKING
HOURS IN THE PHILIPPINES
IV. MINIMUM WAGE LAW:
The Minimum Wage Law ensures that workers
receive a minimum wage to cover basic needs.
- It recognizes that gainful employment should not
just provide a means to subsist but also to live with
dignity. By establishing a minimum wage,
governments aim to prevent the exploitation of
labor by ensuring that workers are paid a fair and
livable wage.
Additional benefits such as meal and rest periods, night
differential pay, and overtime pay are often regulated.
The wage rates may vary depending on the region or
industry.
- While the concept of a minimum wage is universal, its
specific rates may vary depending on the region or
industry. This regional and sectoral differentiation takes
into account cost-of-living disparities and industry-
specific economic conditions. For instance, urban areas
with a higher cost of living may have a higher minimum
wage than rural regions. Certain industries with unique
demands or skill requirements might also have different
minimum wage rates to reflect these factors.
LAWS ON WAGES AND WORKING
HOURS IN THE PHILIPPINES
V. MEAL AND REST PERIODS, NIGHT DIFFERENTIAL,
OVERTIME:

- Meal and rest periods: Workers are entitled to a meal break

of not less than one hour, and a rest period of not less than
five minutes for every hour of work.
- Night differential pay: Workers who work between 10:00
PM and 6:00 AM are entitled to additional compensation.
- Overtime pay: Overtime work, exceeding eight hours a day,
must be paid at a higher rate (e.g., 125% of regular hourly
rate).
LAWS ON WAGES AND WORKING
HOURS IN THE PHILIPPINES

VI. COMPUTATION OF OVERTIME PAY:

Overtime pay is computed based on the worker's regular

hourly rate multiplied by the applicable overtime rate (usually
125%). For example, if the regular hourly rate is Php 100, the
overtime rate would be Php 125 (100 * 1.25).
LAWS ON WAGES AND WORKING
HOURS IN THE PHILIPPINES

VII. WEEKLY REST PERIODS:

- Workers are entitled to a weekly rest period of at least 24

consecutive hours.
- This rest period is usually granted on Sundays, but it can be
modified based on mutual agreement.