Compensation Administration

WAGES – paid to BLUE collared; on daily/weekly/monthly,; can be measured

in terms of money

WAGES – paid to BLUE collared; on daily/weekly/monthly,; can be measured

in terms of money

SALARY – paid to WHITE collared; paid at specified intervals; paid to employees

whose contribution cannot be measured.

SALARY – paid to WHITE collared; paid at specified intervals; paid to employees

whose contribution cannot be measured.

COMPENSATION – comparative form; all basic, gross amount, allowances and

benefits.

COMPENSATION – comparative form; all basic, gross amount, allowances and

benefits.

Compensation

• Remuneration received by an employee in return for his/her contribution to the organization.

Compensation

• Invariably known as Employee Remuneration

• Also known as “pay”• Pay is a statement of an

employee’s worth by an employer and a perception of worth by an employee.

Compensation• Refers to all forms of

financial returns and tangible benefits that employees receive in exchange for their time, talents, efforts, performance, and results.

Compensation• Under Philippine law, wages are

remunerations or earnings for services rendered. Employers and employees may agree on rate but should not fall below the minimum wages set by the Regional Tripartite Wages and Productivity Boards (RTWPB) which has jurisdiction over the place of work.

Assignment

Compensation Management• Process of determining cost-

effective pay structure.• Designed to attract and retain

employees.• Provide an incentive to work hard• Structure pay levels perceived as

fair

Compensation Management• System of compensating

individuals for the work they perform in such a way that the organization is able to attract, retain and motivate them to perform well keeping in view organizational and market factors.

Compensation Management• As the business environment

becomes increasingly complex and global, the challenge to create and maintain effective compensation programs, given cost constraints,

Compensation ManagementCont’n

also requires greater professional expertise, organizational understanding, creativity, and vision than ever before.

TRENDS

Diversity in Strategies• Not too long ago, employees

received a base salary (w/c organizations described as COMPETITIVE) and a set of pre-established benefits (w/c organizations considered COMPREHENSIVE).

Diversity in Strategies (cont.)• Today, firms are providing

variable pay, special recognition bonuses, individual and group incentive plans, and broad-based success-sharing programs at all levels in the organization, and flexible benefits are becoming a norm.

Soaring Benefits Costs• There is general consensus

that the traditional approach to health care is “unsustainable”.

Significant Pay Inequity• There continues to be

significant pay inequity when comparing pay at the “top” and at the “bottom”.

Pay Programs to Communicate Change• Pay programs are increasingly

being used to communicated major changes in the organization, particularly during and after major downsizing and reengineering efforts.

Does pay matter?

• The amount of pay and the way it is packaged and delivered to employees can motivate, energize, and direct behavior.

• Compensation plays an important role in an organization’s ability to attract and retain qualified, high-performance workers. Compensation strategies and practices can clearly shape the composition of a workforce.

• Microsoft sets out to hire a certain percentage of top technical talent that graduates each year. It invests heavily in recruiting and selection activities.

• It offers job candidates a generous sign-on bonus, a competitive base salary, stock options, and a flexible benefits program, which allows individuals to select the benefits and coverage that they both need and value most.

• The cost of compensation can influence firm success. • In 2009, Norway reported

the highest per hour manufacturing compensation costs ($53.89), while the Philippines posted the lowest ($1.50)

• $1 in 2009 = Php46 (est)• Thus, $53.89 = Php2,478.94• If a worker rendered 8 hours a

day, 5 times a week, the worker earns an amount of Php396,630.40 (gross)/ month or Php4,759,564.80 (gross)/year.

• 5,020 1-pc Chicken Joy Value Meal

• 2,938 Amazing Aloha Value Meal

• 881 bus rides thru Victory (Bag-Mla)

For Effective Compensation

• It enables an organization to attract and retain qualified, competent workers.

• It motivates employee’s performance, fosters a feeling of equity, and provides direction to their efforts.

• It supports, communicates, and reinforces an organization’s culture, values, and competitive strategy, especially long-term strategy.

• Its cost structure reflects the organization’s ability to pay.

• It complies with government laws and regulations.