Compensation and Benefits

• A compensation package can include pay, health-care benefits, and other benefits such as retirement plans.
• The compensation package should be positive enough to attract the best people for the job.
• Once the best employees and talent come to work for your organization, you want the compensation to be competitive enough to motivate people to stay with your organization.
• Compensation can be used to improve morale, motivation, and satisfaction among employees.
• Pay systems can also be used to reward individual or team performance and encourage employees to work at their own peak performance.
• Having fairly compensated, motivated employees not only adds to the bottom line of the organization but also facilitates organizational growth and expansion.
• Before development of your compensation philosophies, there are some basic questions to address on your current compensation packages.
• 13th month is also considered as a wage and wage-related benefit.
• DOLE - The Department of Labor and Employment (DOLE) is the national government agency mandated to formulate and implement policies and programs, and serve as the policy-advisory arm of the Executive Branch in the field of labor and employment.
• Wage and Wage-Related Benefits include at least the minimum wage per region and/or sector, holiday wage and overtime pay for work during holidays or rest days, overtime pay when working in excess of 8 hours, Service Incentive Leave: 5 days of vacation per year of service, Parental leaves (Maternity, Paternity and Solo parent leaves), and Other Leaves.
• Separation pay is also considered as a wage and wage-related benefit.
• From the employee’s perspective, what is a fair wage?
• Are wages too high to achieve financial health in your organization?
• Do managers and employees know and buy-into your compensation philosophy?
• Does the pay scale reflect the importance of various job titles within the organization?
• Is your compensation good enough to retain employees?
• Are state and federal laws being met with your compensation package?
• Is your compensation philosophy keeping in line with labor market changes, industry changes, and organizational changes?
• Some possible compensation policies might include the following:
• Are salaries higher or lower depending on the location of the business?
• Are salaries lower or higher than the average in your region or area?
• Should there be a specific pay scale for each position in the organization, or should salaries be negotiated on an individual basis?
• What balance of salary and other rewards, such as bonuses, should be part of your compensation package?
• When giving raises, will the employee’s tenure be a factor, or will pay increases be merit based only, or a combination of both?
• Sixty-two percent of organizations have a written, documented compensation policy.
• One major internal factor is the compensation strategy the company has decided to use.
• Some organizations choose a market compensation policy, market plus, or market minus philosophy.
• A market compensation policy is to pay the going rate for a particular job, within a particular market based on research and salary studies.
• Another pay model is the management fit model, where each manager makes a decision about who should be paid what when that person is hired.
• Pay Systems are the process of setting the pay scale for specific jobs or types of jobs.
• Some organizations have moved to a delayering and banding process, which cuts down the number of pay levels within the organization.
• Laws relating to pay include Labor and Social Legislation.
• Expectancy Theory says that employees will put in as much work as they expect to receive.
• When employees receive raises, their raises stay within the range of their individual pay grade, until they receive a promotion that may result in a higher pay grade.
• Pay theories include Equity Theory, which is concerned with the relational satisfaction employees get from pay and inputs they provide to the organization.
• This proprietary job evaluation method focuses on three factors: know-how, problem solving, and accountability.
• Once the levels are developed, each job is assigned a pay grade.
• The Labor Code of the Philippines, otherwise known as Presidential Decree No. 442, governs all employee-employer relations, their rights and obligations.
• The downside to the management fit model may be potential discrimination, halo effects, and resentment within the organization.
• Reinforcement Theory, developed by Edward L. Thorndike (Indiana University, 2011), says that if high performance is followed by some reward, that desired behavior will likely occur in the future.