TOPIC NO. 8:

COMPENSATION PLAN

Reporters:

Alexandro M. NovoraCesario Raehl B. Bandong

Master in Management

BICOL UNIVERSITY CBEM HUMAN RESOURCE DEVELOPMENT AND MANAGEMENT

DISCUSSION OBJECTIVES

1. To define compensation and compensation plan

2. To enumerate and discuss the different factors affecting the compensation program

3. To briefly discuss the legal basis and requirements regarding employee compensation and benefits based on Labor Code of the Philippines

DISCUSSION OBJECTIVES cont.

4. To present the latest daily minimum wage rate per DOLE (Region 5 & NCR)

5. To present the suggested steps in formulation of a compensation administration plan

6. To provide a sample computation of employees salaries/wages presenting deductions on mandatory employment contributions

I. DEFINITION

• Compensation – Is the equivalent in any form that is given to

the individual for his work– Also called as “the Job Reward”

• Compensation Plan – presents the reward structure of a certain entity, organization, or agency including its philosophy and bases.

TYPES OF REWARD AND REWARD STRUCTURE

1. INTRINSICParticipation in decision-makingGreater Job Freedom & DiscretionMore ResponsibilityMore Interesting WorkOpportunities for Personal GrowthDiversity of Activities

2. EXTRINSICDirect Compensation Indirect CompensationNon-financial Compensation

TYPES OF REWARD AND REWARD STRUCTURE cont.

2.1.Direct CompensationBasic Salaries or WagesOvertime & HolidayPerformance BonusesProfit SharingStock Options

2.2. Indirect Compensation• Protection programs• Pay for Time not Worked• Services and Perquisites

TYPES OF REWARD AND REWARD STRUCTURE cont.

2.3.Non-financial Compensation• Preferred Office Furnishings• Preferred Lunch hours• Assigned Parking• Preferred Work Assignments• Business Cards • Own Secretary• Impressive Titles

II. FACTORS AFFECTING COMPENSATION PLANS AND ADMINISTRATION PROGRAMS

1. Institutional Factors

The financial condition of the organization, size of the organization’s work population, management-labor relations, internal politics, union demands and the collective bargaining agreement in unionized firms either facilitate or stymie program

II. FACTORS AFFECTING COMPENSATION PLANS AND ADMINISTRATION PROGRAMS cont.

2. Environmental Factors

Pertain to external environment for variables like standard and cost of living, labor supply and demand, reward structure of other organizations, political and economic conditions in the country, national policies, laws, statutes and government regulations affecting wages and salaries.

 

II. FACTORS AFFECTING COMPENSATION PLANS AND ADMINISTRATION PROGRAMS cont.

3. Personal Factors The values of the owners and

managers influence their decision on that type, number, and amount of the compensation packages that are given to the employees. “Enough is enough” is a statement that both parties utter in deciding compensation issues.

III. LEGAL BASIS/ REQUIREMENTS REGARDING EMPLOYEES’ COMPENSATION AND BENEFITS

• SIX (6) BASIC EMPLOYEE BENEFITS AND LEGAL BASIS (under Philippine Labor Code)

1. Social Security Systems (SSS) and Government Service Insurance System (GSIS) Contributions

2. Contribution to National Health Insurance Program (NHIP)/Philhealth

3. Contribution to Home Development and Mutual Fund (HDMF)

4. The 13th Month Pay

5. Service Incentive Leave

6. Meal and Rest Periods

• Please Note:

Citations in the Labor Code of the Philippines regarding Employee Benefits will be briefly discussed by the reporter, Mr. Bandong.

SUGGESTED STEPS IN FORMULATION OF COMPENSATION ADMINISTRATION PROGRAM

1) Determine a clear-cut philosophy of the program.

2) Make a study and analysis of each job including job description and job specification.

3) Determine the money worth of each job by doing job evaluation.

4) Conduct a local, national and, if possible, an international survey of pay policies.

5) Determine supply and demand of labor.

6) Formulate overall compensation policies.Source: HRM by C.R. Martires

VI. MANDATORY EMPLOYMENT CONTRIBUTIONS

• Please see attached tables

• Note: Sample computation of salaries & wages showing deductions for mandatory contributions will be presented by the reporter, Mr. Novora.

References• Human Resources Management Principles and

Practices by Dr. Concepcion R. Martires, 3rd ed.• Labor Code of the Philippines• http://www.sss.gov.ph• http://www.bir.gov.ph• http://www.dole.gov.ph/laborcode/book6.asp• http://www.coa.gov.ph/tsolmp/TSOIntra/

Manpower(labor).htm• http:www.philhealth.gov.ph• http://www.pagibigfund.gov.ph• http://www.nwpc.dole.gov.ph

THANK YOU FOLKS!