Professional Documents
Culture Documents
Compensation HRM
Compensation HRM
organization’s human resources needs and acquiring, training, and compensating people to fill
those need. It is concerned with maximizing the satisfaction of employees and improving their
efficiency to meet organizational objectives.
RECRUITMENT
SELECTION COMPENSATION
HUMAN
RESOURCE
MANAGEMENT
DIRECTING BENEFITS
STAFF STAFFING
DEVELOPMENT
COMPENSATION
"Employee compensation refers to all forms of pay going to employees and arising from their
employment."
Compensation is the most important element in the relationship between an employee and a
company. It is the direct payment for work performed by an employee for an organization. It is
also the most visible motivation for an employee to do a job well.
Unfortunately, compensation has not been given a proper attention by most company. It seems
to be the subject that management least likes to talk about and an area where employee
perceived many promises are broken.
Compensation is made up of the basic pay, which refers to salaries and wages and the other
cash payments in the form of allowances, bonuses, and incentives; and benefits such as medical
and hospitalization insurance, uniforms, and subsidized meals. Salaries and wages are very
visible to the employee since these are paid regularly, such as every fifteen days or every
month. Bonuses may amount to about three to six month’s salary. Benefits can cost a company
a minimum of 25 to 35 percent of the basic salary to a high of 75 percent.
COMPENSATION POLICIES
A company whether new or old, must have a clear policy on company pay level or position. This
is one of the crucial policy decisions that will shape the organization and define the kind of
people it will attract or retain. The company must decide what kind of payment system it will
implement.
1. JOB BASED SYSTEM- pays only for the job performed. All persons doing the same job
are paid the same.
2. SENIORITY SYSTEM- based on length of service in the company.
3. MERIT SYSTEM- based on the performance and contribution to the company efforts
and profitability.
4. MIXED SYSTEM- combination of job performance, seniority, as well as other factors.
Direct Compensation
It is naturally made up of salary payments and health benefits. Direct compensation that is in
line with the industry standards facilitates employees with the assurance that they are getting
paid fairly. This helps the employer not to worry about the costly loss of trained staff to a
competitor.
Indirect Compensation
Components of Compensation
Wages mark hourly rates of pay, and salary marks the monthly rate of pay of an employee. It is
irrelevant of the number of hours put in by an employee working in the firm. These are subject
to annual increase.
Wages are financial rewards based on the number of hours the employee works or the level of
output achieved. Wages based on the number of hours worked are called time wages.
Allowances
Allowances can be defined as the amount of something that is allowed, especially within a set
of rules and regulations or for a specified purpose. Various allowances are paid in addition to
basic pay.
House Rent Allowance − Companies who do not provide living accommodation to their
employees pay house rent allowance (HRA) to employees. This allowance is calculated as a
percentage of salary.
Transport Allowance/Conveyance Allowance − Some companies pay transport
allowance (TA) that accommodates travel from the employee’s house to the office. A fixed
amount is paid every month to cover a part of traveling expenses.
Bonuses
A monetary rewards offered by companies for exceptional performance as incentives to further
increase productivity further.
ADVANTAGES OF COMPENSATION
1. Job satisfaction
Employees would be happy with their jobs and would love to work if they get fair
rewards in exchange of their services.
1. Motivation
A compensation plan that hits workers’ needs is more likely to motivate them to act in
the desired way.
2. Low Absenteeism
Employees who are happy with their salaries and being compensated fairly reduce
absenteeism.
3. Low Turnover
Employees will stay and retain on the company if compensated adequately.
LEGAL BASIS OF SALARY AND WAGES IN THE PHILIPPINES UNDER THE LABOR CODE
FORMS OF PAYMENT
TIME OF PAYMENT
Wage shall be paid at least once every two weeks or twice a month, at intervals not
exceeding sixteen days.
DIRECT PAYMENT
Wages shall be paid directly to the workers to whom they are due, except:
As a general rule, the place of payment shall be at or near the place of undertakings.
REGULATIONS
HOURS OF WORK
Where the employees is made to worked on their rest day, he shall be paid an additional
compensation of at least 30% of his regular wage.
ABSENCES
Salary Component:
Other income:
It should be highlighted that the provision for other sources of income depends on the position
held by the employee. An employee may be provided with any of the following possible sources
of other income.
Deductions:
The monthly deductions, on the other hand, shall include the following:
Overtime
An employee has rendered work if he was required to work under any of the following
conditions.
1. Beyond the regular work hours on ordinary days (regular HR -8hrs)
2. On Saturdays beyond the required alternating Saturdays
3. On Rest Days
4. On Legal and Special Holidays
Resource: This material was provided by the HR of a Filipino-owned food production and
distribution company