MOD 2 OAM

• COMPENSATION - monetary payment given to an individual in exchange for their services.
• COMPENSATION POLICY - set of general guidelines established by the top management of a company in paying and rewarding employees for the work they rendered
• MANAGEMENT CONSIDERATION IN A COMPENSATION POLICY

  1. Economic

  compensation ability to

  • attract applicants
  • motivate employees
  • retain employees

  compensation policy capacity to

  * maintain cost structure that enables company to complete effectively and efficiently in its markets
• MANAGEMENT CONSIDERATION IN A COMPENSATION POLICY

  2. Fairness/ equity

  • internal equity - fairness in pay among different jobs w/in org
  • external equity - fairness in pay relative to others holding the same jobs outside org
  • individual equity - fairness in pay among coworkers holding identical job w/in org
• MANAGEMENT CONSIDERATION IN A COMPENSATION POLICY


  3. Market competitiveness - adopt employee salary based on market rates prevailing in the industry to provide compensation package that is attractive to current and potential employees
• MANAGEMENT CONSIDERATION IN A COMPENSATION POLICY

  4. Link with company performance - company that continually experiences high financial growth for many years is expected to increase the compensation of its employee
• COMPONENTS OF A COMPENSATION SYSTEM


  • Direct Compensation - compensation based on the extent of work actually rendered by employee
  • Indirect Compensation - compensation either in compliance with the law or optional benefits
• COMPONENTS OF A COMPENSATION SYSTEM 


  • Base pay (Salaries, wages)
  • incentives
  • bonus
  • comms
  • profit sharing arrangements
  • stock options
  • merit increase
• MANAGEMENT CONSIDERATION IN A COMPENSATION POLICY


  indirect

  • legally acquired benefits (sss, gsis, phil health, pag ibig)
  • optional benefits (med insurance, life insurance, retirement plan)
  • incentives based on individual or group
  • high performing - individual
  • low - group
• REWARDS


  intrinsic rewards

  • non monetary rewards (eg recognition prog)

  extrinsic rewards

  • monetary or material rewards