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• Compensation


  The total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required
• Objectives of Compensation Management

  • Compliance
  • Attract Top Talents
  • Retain & Reward Personnel
  • Boost Employee Motivation
  • Maximize Return on Investment (ROI)
• Compensation system


  Anything that an employee may value and desire and that the employer is willing and able to offer in exchange
• Components of the Compensation System

  • Compensation components (base pay, allowances, bonuses, commissions)
  • Non-compensation components (free food, gym membership)
• Parts of the Compensation System

  • Job Descriptions
  • Job Analysis
  • Job Evaluation
  • Pay Structures
  • Salary Surveys
  • Policies and Regulations

  
• Job Evaluation Techniques


  • Job Ranking
  • Job Classification
  • Factor Comparison
  • Point-Factor
• Components of Compensation


  • Base pay
  • Wage and salary add-ons
  • Incentive pays
  • Benefits

  
• Direct compensation


  Compensation that goes directly to the employees as part of their paycheck
• Indirect compensation


  Compensation where employees do not get any funds, such as a benefits program
• Expectancy Theory


  A process theory of motivation which proposes that employees are motivated when they believe they can accomplish a task and that the rewards are worth the effort
• Equity Theory


  Proposes that people are motivated to seek social equity in the rewards they receive (outcomes) for their performance (input)
• When employees perceive that they are under rewarded, they may try to reduce the inequity by increasing outcomes, decreasing inputs, or distorting perceptions
• Equity


  Employees believe that there is inequity, they will change their behavior to create what they consider to be equity
• Perceptions of fairness


  Employees must perceive that they are being treated fairly relative to others
• Perceptions of inequity


  Hurt attitudes, commitment, and cooperation, thereby decreasing individual, team, and organizational performance
• Perceptions of inequity


  Used as a justification for unethical behavior
• Employees' response to perceived inequity

  1. Decreasing inputs (e.g., doing less work, being absent, taking long breaks, etc.)

  2. Increasing outcomes (e.g., requesting a raise or committing theft)

  3. Rationalizing (e.g., finding a logical explanation for the inequity)
• When most employees perceive that they are overrewarded, they rationalize it in some way and accept it
• When employees perceive that they are equitably rewarded, they are motivated to continue to put forth the same effort for the organization so long as they are content that inputs and outcomes are in balance
• People are not motivated to work harder by equity; rather, they are demotivated if it does not exist
• HR managers need to understand that people will be demotivated if they feel (perceive) that they are not being treated fairly, especially regarding compensation
• Performance-based compensation


  Paying more for performance which means being able to complete certain tasks or doing certain things faster or better than average, or just being there and being loyal to the firm
• Longevity-based compensation


  Paying people more for longevity or seniority, which means accumulating years of service with the firm by promotions and raises over time (assuming the employee meets minimal organizational standards) regardless of performance
• Skill-based/Competency-based compensation


  Paying members of the workforce for individual skills or competencies that they bring to work, whether those skills are necessary for the individuals to do their current job
• Above market pay


  The organization may decide to pay above market to attract better workers and enhance the company's employment brand
• Below market pay


  If the firm is in an industry where unemployment is high, it is easy to find replacement workers, and if most positions require a low-level skillset, the company may be able to get away with paying less than average
• Salary structure


  A system that employers use to determine an employee's compensation
• Types of salary structure

  • Traditional salary structures
  • Broadband structures
  • Market-based structures
• Traditional salary structures


  • Divided into numerous pay grades, salary increases are relatively small jumps between pay grades, used to prevent employees from capping out at the maximum salary too quickly
• Broadband structures


  • More flexible than traditional salary structures, utilize fewer pay grades, each pay grade has a wider salary range than traditional structures
• Market-based structures


  • Based on what other employers pay employees, salary ranges can be high like broadband structures but generally narrow and consistent
• Salary structures and wages in the Philippines are determined by factors such as nature of work, workplace location, working hours, type of industry/sector, and others
• The Department of Labor and Employment (DOLE) and its affiliate agency, the National Wages and Productivity Commission (NWPC), are mandated to enforce the Labor Code of the Philippines, which prescribes employment regulations and labor laws for companies operating in the Philippines
• Minimum wage rates in the Philippines vary in every region, with a Regional Tripartite Wages and Productivity Board (RTWPB) to monitor economic activities and adjust minimum wages based on the region's growth rate, unemployment rate, and other factors
• Salary computation for work on a regular day

  Basic daily rate = Monthly rate × Number of months in a year (12) / Total working days in a year
• Salary computation for work on a special day

  130% × Basic daily rate
• Salary computation for work on a special day scheduled as rest day

  150% × Basic daily rate
• Salary computation for work on a regular holiday

  200% × Basic daily rate
• Salary computation for work on a regular holiday also scheduled as rest day

  260% × Basic daily rate
• Normal working hours shall not exceed eight (8) hours a day