HRMGT 6: COMPENSATION ADMINISTRATION

7TH WEEK

POLICIES, PRINCIPLES, AND PROBLEMS IN

COMPENSATION ADMINISTRATION.

Reported by: Gil de Brando

Ivy Dayola

Reference: Human Resources Management By: Snell & Bohlander

TOPICS TO BE TAKEN:

• General policies in salary administration.

• Principles considered in salary

administration.

• Problems in salary administration.

INTRODUCTION:

Compensation administration is the most sensitive among all functions of the HR department. The pay and benefits you, as an employee, receive are a yardstick of how adequately the company is willing to meet your needs.

Another name of compensation administration is salary administration.

Different companies have different policies

regarding their salary administration.

• Normally all jobs in the organization are classified

into various pay classes; that is to say, a pay class

for each job.

• A minimum and a maximum salary for each class has been fixed and established in accordance with the

Job Classification.

• All salary increases are in accordance with the

graduated steps in the pay class and within the salary range for the pay class occupied by the employee.

Company’s reward philosophy and reward system

• Intrinsic reward

• Extrinsic reward

Intrinsic rewardWhich include:

• Employee empowerment and greater participationin decision making

• More responsibility• Interesting and challenging work and;• Opportunities for personal growth

Extrinsic reward

Subdivided into:

1.Direct compensation2.Indirect compensation3.Non-financial compensation

Extrinsic reward

1. Direct compensation• Basic salary• Overtime and holiday

pay• Performance bonus• Profit sharing or stock

option• Pension and retirement

pay• And others

2. Indirect compensation

• Insurance and tenures• Scholarship, tuition refunds,

bus services, gasoline allowance, housing, rice supply, uniform

allowance, counseling, recreational membership and legal services

• Fringe benefits

Extrinsic reward

3. Non-financial compensationIs usually rewarded to officers, and it takes

the form of assigned parking, assigned administrative assistant, and prestigious titles.

GENERAL POLICIES IN COMPENSATION ADMINISTRATION

General policies in compensation administration

Are contingent to innovative ingenuity of the HR executives and the availability of funds of the company.

Salary Structure for 2002-2003/Guthrie-Jensen Consultants, Inc.

Level 1 – Jobs that are highly manual, which involve little skills and more of physical exertion. Jobs classified are: Typing, filling and other clerical works, messengerial, collecting, janitorial and driving.

Salary range Hiring rate: P8,000.00 and permanent rate: P9,500.00.Succeeding increases:

a. 5 to 10% increase every yearb. 15 to 20% increase depending on performancec. Adjustment depending on wage order

Level 1 – Jobs that are highly manual, which involve little skills and more of physical exertion. Jobs classified are: Typing, filling and other clerical works, messengerial, collecting, janitorial and driving.

Salary range Hiring rate: P8,000.00 and permanent rate: P9,500.00.Succeeding increases:

a. 5 to 10% increase every yearb. 15 to 20% increase depending on performancec. Adjustment depending on wage order

Salary Structure for 2002-2003/Guthrie-Jensen Consultants, Inc.

Level 2 – Jobs that involve skill but require a little planning and organizing. Jobs classified are: Stock and inventory maintenance, encoding, secretarial, purchasing.

Salary range Hiring rate: P9,500.00 and permanent rate: P10,000.00.Succeeding increases:

a. 5 to 10% increase every yearb. 15 to 20% increase depending on performancec. Adjustment depending on wage order

Level 2 – Jobs that involve skill but require a little planning and organizing. Jobs classified are: Stock and inventory maintenance, encoding, secretarial, purchasing.

Salary range Hiring rate: P9,500.00 and permanent rate: P10,000.00.Succeeding increases:

a. 5 to 10% increase every yearb. 15 to 20% increase depending on performancec. Adjustment depending on wage order

Salary Structure for 2002-2003/Guthrie-Jensen Consultants, Inc.

Level 3 – Jobs that involve talking to clients, coordinating, collecting data, little decision-making and a great deal or report writing. Job classified are: Telemarketing, research assistant, executive secretary.

Salary range Hiring rate: P12,000.00 and permanent rate: P14,000.00.Succeeding increases:

a. 5 to 10% increase every yearb. 15 to 20% increase depending on performancec. Adjustment depending on wage order

Level 4 – Supervisor level

Level 5 – Managerial level/Consultants

Level 6 – Executive level/Partners

Level 3 – Jobs that involve talking to clients, coordinating, collecting data, little decision-making and a great deal or report writing. Job classified are: Telemarketing, research assistant, executive secretary.

Salary range Hiring rate: P12,000.00 and permanent rate: P14,000.00.Succeeding increases:

a. 5 to 10% increase every yearb. 15 to 20% increase depending on performancec. Adjustment depending on wage order

Level 4 – Supervisor level

Level 5 – Managerial level/Consultants

Level 6 – Executive level/Partners

Salary increases

Models of general policies in salary administration:

1. Merit increase

2. Promotional increase

Procedure in salary increases

1. Annual review

2. Special review

Job movement and salary administration

• Upward movement (promotion)

• Lateral movement (transfer)

• Outward movement (change job, resignation, layoff, retirement, discharge)

• Downward movement (demotion)

PRINCIPLES CONSIDERED IN SALARY

ADMINISTRATION

Principles considered in salary administration

1. “Equal pay for equal work”

2. “A fair day’s pay for a fair day’s work”

3. “Incentive pay for extra effort”

PROBLEMS IN SALARY

ADMINISTRATION

Problems in salary administration

• The difficulty in determining what is an adequate and fair pay for a particular job.

• The utmost desire of the employees to earn more money and simultaneously of management to operate and greater profit.

• Employees are not satisfied with what they receive and they continuously agitate for higher salaries and benefits in order to improve their living standard.

Problems in salary administration

• Employers’ perennial concern to keep the operating costs as low as possible so that they could offer their products or services within the reach of consumers.

• Employers were right to keep the operating costs as low as possible. Employees were right to demand for an increase in wage due to the price hike of the basic commodities.

• The lack of sound pay policy.

• The absence of a written policy and clear guide in determining the wage levels

SOUND COMPENSATIONPOLICY IS IMPERATIVE

Sounds compensation policy is imperative

1. When the pay policy is clearly spelled out2. When the policy is uniformly and consistently

implemented3. When it is flexible enough to meet economic

contingencies.4. When the wage policy has in-built safeguards5. The policy has to be properly disseminated

and made known to all.

Thank You

BSBA (HRDM) 3AHRMGT 6: Compensation Administration