Compensation and benefits refer to the pay and indirect compensation provided to employees in exchange for their work. They are an important part of human resource management. Compensation includes salary and hourly wages, while benefits cover indirect pay like health insurance and retirement plans. Compensation and benefits packages motivate employees and impact retention when they are fair, clearly communicated, and meet employee needs and expectations.

1. KEN RYAN DIZON, MN, RN
STUDENT, MBA-HEALTH

2. Compensation and benefits refer to the benefits
a firm provides to its employees in exchange for
their labor. Compensation and benefits are thus
a key part of Human Resource Management.

3. WHY ARE
COMPENSATION,
REWARDS AND
BENEFITS
IMPORTANT?

4. WHAT ARE COMPENSATION AND
BENEFITS?
COMPENSATION
- Salary
- Hourly, weekly, monthly, or hourly rate
BENEFITS
- Cover indirect pay (health insurance, stock options, or any myriad things
offered the employees)

5. Components of
Compensation
and Benefits

6. - Overtime pay, stock options, 401k matches, pension plans, days off, and
even free lunches make up an essential part of the compensation and
benefits package.
- United States - health insurance makes up a key component of benefits.
- Europe - there is often a focus on more social benefits, including parental
leave, severance pay, and termination notice.
- France and Finland - it is not uncommon for employers to pay for
restaurant vouchers that cover part of the employee’s lunch.

7. Philippines
 Personnel benefits costs shall include salary increases, step increment, incentive
and service fees, commutation of vacation and sick leaves, retirement and life
insurance premiums, compensation insurance premiums, health insurance
premiums, HDMF contributions, hospitalization and medical benefits, scholarship
and educational benefits, training and seminar expenses, all kinds of allowances,
whether commutable or reimbursable, in cash or in kind, and other personnel
benefits and privileges authorized by law, including the payment of retirement
gratuities, separation pay and terminal leave benefits. (DBM, 2011)

8. 2021 PHILIPPINES BENEFITS SUMMARY
 Holidays
 Vacation
 Retirement
 Healthcare
 Leaves: Sick, Maternity (expanded), Paternity, Bereavement, Solo Parent
Leave, Calamity, Magna Carta for Women (SL), Leave for victims of VAWC
 Disability/ Life Insurance

9. Other Benefits:
- 13th Month Pay
- Mid-year bonus
- Rice Allowance
- Meal subsidy
- Tuition fee subsidy
- Global Education Opportunities Program
- Kapwa Tulong Club
- Attendance bonus
- Prolong Sickness (PSL) Benefits
- Loyalty Token

10.  Most often, compensation and benefits (commonly referred to as comp &
benefits) fall under the responsibility of the Human Resources department.
 In a small company, an HR generalist would handle all aspects of this
process, while in a large company, there would be dedicated departments
to manage these.

11. WHY ARE
COMPENSATION
AND BENEFITS
IMPORTANT?
 First, people won’t work for you without pay.
 Secondly, as of June 2019, benefits make up
31.4 percent of the cost of employing someone.
*compensation motivate employees and increases
make a difference.

12. COMPENSATION
AND BENEFITS
AND EMPLOYEE
MOTIVATION
 According to Glassdoor, a 10 percent increase in base
pay resulted in a 1.5 percent increase in the chance that
the employee would stay at the company for their next
role, rather than moving on.
 A Payscale study found a strong correlation between pay
and engagement (and engagement profoundly
influences retention), but what was stronger is pay clarity.
When employees understood that their compensation
was fair, it increased their engagement.

13. Procedural and distributive fairness
1. Distributive fairness - refers to the perceived fairness of the amount of
compensation the employee receives.
2. Procedural fairness - refers to the perceived fairness of the means used to
determine those amounts.
*Research shows that both distributive fairness and procedural fairness lead to
higher employee retention.

14. *However, when it comes to employee engagement (or motivation), procedural
fairness seems more important than distributive fairness.
In other words, it’s not so much about money as it is about communication and
honesty.
-many companies keep salary information confidential.
-Some managers even punish employees for sharing their salaries with co-workers
*Secrecy can backfire, though, as employees are concerned that their pay is not fair.

15. When an employee clearly
understands that their
compensation is
commensurate with their
skills, position in the
company, and broader job
market, they are more likely
to be engaged in their
work.

16. Benefits and Motivation
 Other benefits, such as pensions, 401ks, and stock options, also help increase
employee retention.
 Many of these benefits require a period before the employee is vested.
 If you quit before this date, you give up the stock or 401k match or other benefits.
 Researchers at the University of Pennsylvania found that delayed compensation did
decrease turnover overall, but it also resulted in employees quitting just after they
did vest.
 The Society for Human Resource Management (SHRM) found that 62 percent of U.S.
employees rated their health care benefits as very important to them.
 The same SHRM study also found that indirect compensation benefits also strongly
influenced employee happiness.
 The traditional money-based programs, such as retirement benefits, were also
important.

17. HOW DO HR DEPARTMENTS
CALCULATE COMPENSATION AND
BENEFITS?
 While governments set the floor for pay, known as a minimum wage,
businesses are generally free to set their own wages.
 A market-rate can also be defined as a “going rate” and is the amount
people are willing to pay for a particular good or service. Employees are
offering their services and fall under this definition.
 A compensation specialist will use salary surveys to help her determine a
market rate.

18.  Compensation managers often use statistical tools, such as regression
analysis, to establish a proper salary position. The variables that the
regression use can include:
1. Highest degree earned (and type and degree area)
2. Years of experience
3. Tenure with the company
4. Position tenure
5. Current salary
6. Full-time equivalent status
7.Exempt vs. non-exempt status
8. Grade level or salary band classification
9. Employee location (if you have multiple locations)
10. Job performance ratings

19. 3 MODELS TO EXPLAIN
COMPENSATION AND BENEFITS
While compensation and benefits is a flat model to explain differences in pay,
there are two scientific models that enable us to understand compensation
and benefits in a better way.
1. Compensation and benefits vs. total rewards
2. Warr’s Vitamin Model
3. Simon Sinek’s Why Model

20. 1. Compensation and benefits vs. total
rewards
 As discussed, compensation and benefits are not the
only aspects of employee happiness, engagement,
and retention.
 The Total Rewards Model
demonstrates the interplay
between the organization and
compensation.

22.  The Total Rewards Model, coined by WorldatWork, proposes that total rewards
are made up out of two elements:
1. Direct compensation. This consists of:
 Salary. This is the base and variable pay for work.
 Rewards. Other monetary benefits from working at the company, including health
care, retirement pay, and allowances.
2. Indirect compensation. This consists of:
 Work-life balance. A good work-life balance is crucial for a happy career.
 Recognition. Recognition by colleagues and supervisors, as well as external
recognition for your job.
 Development & career. Training and development, mentor programs, talent
(mobility) programs.

23.  If you only look at compensation
when determining what makes
employees happy, you’ll fall short.
 Total rewards look at how all aspects
of an employee’s work-life impact
their satisfaction. Research shows that
Total Rewards offers a valid
framework to reduce employee
turnover.

24.  For years, Gallup tracked employee
engagement daily and found that
engagement generally stayed
between 30 and 35 percent of
employees. This means there is a lot
of work to be done in this area.

25.  As established above, pay and
benefits are not the only things
that make employees
happy. Management practices
have significant impacts on
employee happiness and
profitability and even reduced
workplace accidents. Ignoring the
culture part of an employees’ total
rewards can reduce company
performance and increase
turnover.

26. 2. Warr’s Vitamin Model
 Another approach to compensation and benefits is Warr’s vitamin model.
 A vitamin deficiency produces bodily impairment and may lead to physical
illness.
 Normal vitamin intake improves health. However, an excess of vitamins can
have different effects.
 According to Warr, an overdose of vitamins C and E neither improve nor
impair the individual’s health. However, excess of vitamins A and D lead to
toxic concentrations, which causes ill health.

27.  Warr grouped job characteristics in these two categories, CE and AD.
1. CE is short for Constant Effects. Once an optimum is reached, any additional
resources don’t add anything to employee well-being. Examples include
 Pay level
 Pleasant environmen
 Safe work practices
 Adequate equipment
 Value to society
 Supportive and considerate supervision
 Job security

28.  2. AD is short for Additional Decrement. Once the optimum is reached, any
additional resources hurt employee well-being. Examples include
 Task discretion
 Influence
 Skill use
 Number of job demands
 Difficulty of job demands
 Range of different tasks
 Future predictability
 Availability of feedback
 Amount of social contact

30.  It is key to identify the optimum level for employees when it comes to
compensation and benefits. Too much will either cost the organization
resources (time, money, administration) in the case of CE, or will decrease
employee well-being in the case of AD.

31. 3. Simon Sinek’s Why Model
 Sinek’s Why model can also apply to compensation and benefits.
 Sinek says that the best and most influential communicators begin with
the why – why we do this. And the answer to the question, “Why?” cannot
be to achieve shareholder value. That does not inspire.

32.  Inspiration and understanding of underlying company culture and values
increase engagement, especially among Millennials and Gen Z.
 They prefer to meet with their managers one on one–and finding the why
in their job is part of this.
 Millennials want to see companies benefiting society, not just
shareholders. If you can explain why your company exists, it can impact
your millennial turnover and engagement.

33.  Your compensation packages and your total rewards models should not remain
static. There are generational differences. As Gen Z enters the workforce, you’ll
note that they (generally speaking) behave differently than prior generations, and
compensation needs to adjust.

35. COMPENSATION AND BENEFITS
PACKAGE EXAMPLE
 What should a compensation and benefits package look like? There is no
one answer for that as the package for a grocery store clerk will have little
in common with the CEO’s package. However, here are some standard
items that companies often include in a job offer

36. You’ll need to adjust for your organization, local laws, and employee level.
 Salary
 Overtime pay
 Bonuses and commissions (discretionary and non-discretionary)
 Retirement (defined benefit and defined contribution plans)
 Stock options
 Restricted stock
 Vacation
 Profit-sharing
 Merit pay
 Sign-on bonuses
 Relocation bonuses
 Housing, school, and meal reimbursement
 Healthcare benefits (medical, dental, vision, etc.)

37. Other things to consider:
 Salespeople, for instance, will need a commission plan that details what
their commission is, and under what circumstances they receive it (is it
when the paperwork for the sale is signed or is it when the customer
pays?).
 Profit-sharing plans need to define what constitutes a profit, and when
such, the company pays the bonuses (yearly, quarterly?).
 Companies must operate within the confines of laws. Summary Plan
Descriptions should define everything legally, and you should provide
these to employees, so they know precisely what their compensation and
benefits are. While all these things are, generally, negotiable, you must
maintain equity with similarly situated employees, to prevent illegal or
immoral discrimination.

38.  Compensation packages cannot detail the total rewards aspect of any job
offer. But, understand that your job candidates look for that.
 You can no longer hide behind a large salary offer and hope that everyone
ignores the culture your office has to offer.
 Compensation and benefits are key components for company success,
employee engagement, and turnover. You should evaluate your plans and
programs regularly (at least yearly) to ensure that you meet both employee
expectations and remain competitive in the marketplace.

39. GOOD OR BAD
PRACTICES:
Discussion of two
company cases on
compensation and
benefits

40. BAYER
Bayer is committed to providing state-of-the-art
benefits to its employees. Benefits contribute to
individual and family health, increase financial
security, and help create a comfortable work-life
balance that improves quality of life.
We ensure a high level of social protection in our
workplaces. Nearly all Bayer Group employees have
health insurance as well as access to a company
pension plan. The working conditions for over half of
our employees are governed by collective or
company agreements. We are constantly working to
increase the benefits we provide and our goal for the
future is to have the highest level of social protection
available for all employees.

42. OVERWORKED,
UNDERPAID
FILIPINO
HEALTHCARE
WORKERS

44.  In institutions, the ratio of health professionals per 100,000 people also in
2017 was:
 Doctors: 3.9 per 100,000
 Nurses: 8.6 per 100,000
 Midwives: 4.1 per 100,000
 Medical technologists: 1.3 per 100,000

48. Thank you!