Human Resource Management Decenzo book author

1. Chapter 11 Establishing Rewards and Pay Plans
(Slide 2) Introduction
total rewards - Comprehensive view of employee compensation that includes pay,
training, health and wellness management, benefits, paid time off with nonmonetary
rewards such as work–life balance, challenging and fulfilling work assignments,
supportive work culture, autonomy, and opportunities for advancement.
(Slide 3) Rewards
compensation is commonly classified as either intrinsic or extrinsic rewards, financial or
nonfinancial rewards, and performance‐based or membership‐ based rewards.
(Slide 4) Intrinsic versus Extrinsic Rewards
intrinsic rewards - Satisfaction derived from the job itself, such as pride in one’ s work, a
feeling of accomplishment, or being part of a team. Feeling a sense of achievement or
personal growth from a job is an example.
(Slide 5) Intrinsic versus Extrinsic Rewards
extrinsic rewards - Benefits provided by the employer, usually money, promotion, or
benefits. Salary increases or flexible working conditions would be examples. These could
be financial and nonfinancial rewards.
(Slide 6) Financial versus Nonfinancial Rewards
Financial rewards are the monetary compensation employees receive from the
organization. It includes payments for base pay or basic pay, estimated cost of living
allowance (ECOLA) for some regions, shift differential pay like night differential for call
center representative usually shifts that starts at 10pm onwards, bonuses like 13th
month
pay/mid-year bonus/signing bonus/referral bonus etc., performance‐based pay like
commission/incentives/talent fees etc., and overtime pay. It also includes benefits such
as pension plan contributions (ex. Minimum of 10years employed in a company can avail
early retirement), paid time off (sick leave, vacation leave, emergency leave, birthday
leave, maternity(3months)/paternity (7) leave, study leave, single parent leave, magna
carta or special leave for women entitlement of up to two (2) months with full pay based
on her gross monthly compensation following surgery caused by gynecological

2. disorders, and paid holiday break), and stock options (stock’s dividend pay, company
stocks share ownership usually offers to executive or board of directors of the company) .
Nonfinancial rewards not directly increase the employee’s financial position, but make
life on the job more pleasant. Daily positive feedback, e‐mails recognizing effort,
mentioning accomplishments in meetings (like reaching sales quota, credits to the owner
who accomplishes a job well done) or presenting awards (ex. Perfect attendance of the
month), celebrating birthdays and holidays are simple, inexpensive ways to reward
employees.
Status-conscious employees may appreciate a new job title, access to the latest
technology, their own administrative assistant, or a well‐located parking. Other
employees may value gym memberships, bringing pets to work, opportunities to dress
casually while at work, or even the opportunity to work from home occasionally.
(Slide 7) Performance-based versus Membership-Based Rewards
Under financial rewards there are performance-based and membership-Based
Rewards.
Performance‐based rewards are designed to provide an incentive for high productivity
using commissions, piecework pay plans, incentive systems, group bonuses, merit
pay, or other forms of pay for performance.
Membership‐based rewards, on the other hand, include cost‐of‐living increases,
Benefits (ECOLA), and salary increases related to labor‐market conditions (local rate per
day increase or company yearly increase sometimes every 5 years), seniority (usually
they are candidate for promotions), or time in rank (ex. a sergeant cannot become captain
unless he serves an appropriate amount of time as a lieutenant).
(Slide 8 – 9 ) Government Regulation of Compensation Fair Labor Standards Act
Fair Labor Standards Act for most U.S. employees. In the Philippines, employment law is
governed by the Labor Code of the Philippines and covers the labor standards – this
prescribes the conditions of employment that both employers and employees have to
abide by, such as types of employment, working hours, minimum wage, mandatory
benefits, holidays, rest days, and employment rights.

3. Labor Standards
1. Types of Employment
 Regular/Permanent Employment – others undergo probationary employment for
a maximum of six (6) months to evaluate their skills and performance.
 Casual Employment – employees that have rendered service for at least one (1)
year in the same company, whether continuous or not, shall be considered regular
employees with respect to the activities they perform and will continue rendering
service while such activities exist in the company.
 Term/Fixed-Term Employment – ex. Contract of service
 Project Employment – ex. construction
 Seasonal Employment – common practice in service industries, such as Retail,
Food and Beverage, and Hospitality to increase manpower and cover labor
demand during peak seasons. Ex. Si SM hypermarket nag hire ng additional bagger
during November and ends by December to meet the Christmas rush.
2. Minimum Wages
Minimum wage rates in the Philippines vary per region and are prescribed by the Regional
Tripartite Wages and Productivity Board (RTWPB). Under the most recent wage order for
the National Capital Region (i.e., Metro Manila), the minimum gross rate is PhP610.00 for
the non-agriculture sector and PhP573.00 for the agriculture sector.
3. Mandatory Employee Benefits
Under the Labor Code, employees in the private sector are granted six (6) basic
mandatory benefits, which are as follows:
1. Social Security System (SSS) – which provides these employees and their
families protection from disability, illness, old age, and death.
2. Philippine National Health Corporation (PhilHealth) – the health insurance
program.
3. Home Development Mutual Fund (Pag-IBIG Fund) – the housing loan program,
which offers flexible housing loans to private employees.

4. 4. 13th Month Pay – a mandatory salary bonus equivalent to an employee’s one (1)
month salary, which must be given not later than December 24 every year
5. Service Incentive Leave – employees who have rendered at least one (1) year of
service is entitled to a yearly service incentive of five (5) days with pay
6. Meal and Rest Periods – lunch break not less than one (1) hour and rest periods
of short duration in the morning and afternoon usually 15-30mins coffee break that
should be included in the hours worked.
4. Working Hours
 Normal Work Hours must not exceed eight (8) hours a day.
 Night Shift Differential Pay - An employee performing work between 10:00 PM
and 6:00 AM must be paid a night shift premium of not less than 10% of their
regular wage for each hour of work performed.
 Overtime Work - additional compensation equivalent to an employee’s regular
wage plus at least 25% thereof.
Employees who work beyond 8 hours on a holiday or rest day shall also be paid
an additional compensation equivalent to the rate of the first 8 hours plus at
least 30% thereof.
 Undertime Not Offset by Overtime
 Emergency Overtime Work
5. Other Mandatory Rights and Benefits
 Right to Weekly Rest Days (day off) – 1 day off in 6 consecutive work.
 Right to Holiday Pay – 100% regular holiday 30% special non-working holiday
 Right to Separation Pay – in case of lay off (dismissed from work due to
business closure, reduction of costs or other reasons that are beyond their
control) should be granted separation pay equivalent to one (1) month salary or
at least one (1) month salary for every year of service in the company.
 Service Charges – usually collected by hotels, restaurants, banks and similar
establishments shall be distributed at the rate of 85% for all covered
employees and 15% for management. The share of the employees shall be
equally distributed among them.

5. (Slide 10) Compensation Administration Equal Pay Act
As we discussed in Chapter 3, the Civil Rights Act protects employees from
discrimination. In Philippines, the Act shall be known as the “Fair Pay Act of 2007.” an act
prohibiting discrimination in the payment of wages on account of sex.
(Slide 11) External Factors Affecting Compensation
HR must also consider external factors in wages and labor supply such as:
 Geographic Differences – ex. In a certain place there are many licensed teachers
thus the wage is low, in other places, there are no geodetic engineer so the wage is
high.
 Labor Supply - unemployment rates are high; wages tend to be depressed
because employers have a plentiful supply of applicants.
 Competition – if competition is tight, paying higher wages than competing
employers to attract qualified workers.
 Cost of Living - Inflation raises the price of consumer goods and reduces the
buying power of wages in real terms. Ex. The food and rental expense in large cities
cost higher than in province or small municipalities. The reason why minimum
wages in different places are not the same.
 Collective Bargaining - The major function of most unions or collective bargaining
units is to negotiate for the wages of its members. Will discuss more detail in
Chapter 14.
(Slide 12) Compensation Administration
In Chapter 3, we described several ways that government policies shape and influence
HRM. In a company the compensation administration is the HR whose specialty is on
payroll account and benefits. In the Philippines as a whole, the compensation
administration is the DOLE.
(Slide 13) Job Evaluation
Job evaluation is the foundation of compensation administration and the establishment of
a pay structure. in chapter 5, we have already discussed the job analysis where in the data
gathered are used to develop job descriptions as well as to do a job evaluation
that systematically determines the value of each job in relation to all jobs within the

6. organization. It is the basis of pay structure of a company, the higher the position usually
gets paid higher the lower position get lower paid too. But the higher position gets the
high-level task like planning, analyzing, decision-making etc., while lower position
usually does the labor and hard work like selling, facing customers, clerical jobs etc.
(Slide 14) Job Evaluation 3 Method
1. ranking/ordering method - Ranking job worth from highest to lowest. Can be seen in an
Organizational Chart of a company.
2. classification method - Evaluating jobs based on predetermined job grades. Examples
might include administrative, engineering, and transportation, depending, of course, on
the type of jobs the organization requires. In Philippines there are 33 salary grades
(Salary grade 1-33) according to the level of difficulty, responsibility, and qualifications
necessary. Within each grade are 8 steps that determine salary level.
Salary grade 1 = 13,000, salary grade 33 = 431,718
3. point method - Breaking down jobs based on identifiable criteria such as education,
skill, effort, responsibility, and working conditions. Points may be weighted more heavily
if increased education (Masteral, Doctoral, eligibility or license), skill (Tesda NCII or
NCIII), or experience (managerial or rank and file) is required for the position. Pay grades
or ranges are assigned to jobs based on the total number of points.
(Slide 15) Establishing the Pay Structure
Once the job evaluation is complete, the data generated become the basis of the
organization’s pay structure.
1. Compensation Surveys - Used to gather factual data on pay practices among firms and
companies within specific communities. Ex. If magpatayo ka ng food business sa Cotabato
city, need mo magconduct ng compensation surveys sa ibang food business para
malaman ang salary rate per day ng mga cashiers or service crew.
2. Wage Curves - Drawn by plotting job evaluation data (such as job points or grades)
against pay rates (actual or from survey data). Indicate whether the pay structure is
logical

7. 3. wage structure - A pay scale showing ranges of pay within each grade. For instance,
Salary grade 1 may cover the range from 0 to 150 points, pay grade 2 from 151 to 300 points,
and so on.
(Slide 16 & 17) Graph
(Slide 18) Types of Compensation
There are many different forms of compensation available to build a compensation
program. The basic building blocks available are base pay, premium pay, and variable pay.
1. Base Pay - may be paid as salary or hourly wage.
 piecework (pay based on number of units produced typically in a specified time
period.) commonly used in construction and manufacturing.
2. Premium Pay - pay differentials for work assignments that are undesirable, hazardous,
or inconvenient. Ex. overtime pay in excess of 40 hours a week and working on weekends
or holidays. shift differential pay like night differential for call center agents, Hazard pay
for unsafe working conditions and workers with special skills such as being bilingual.
(Slide 19) Types of Compensation
3. Variable Pay or incentive pay - Incentives can be paid based on individual, group, or
organization‐wide performance.
 Individual Incentive plans - performance goals basis, those who perform better
generally receive more pay.
 Commissions are a type of individual incentive common for sales workers. Ex.
Real estate agent, sales persons or salesman, car dealers, brokers etc.
 Bonuses – ex. Holiday or year-end bonuses, spot bonuses or cash awards for
exceptional performance, referral bonus for new customers or job applicants,
signing bonus upon signing of agreement etc.
 merit pay - annual increase based on performance.
 Competency‐based compensation - Organizational pay system that rewards
skills, knowledge, and behaviors relevant to their position. Ex. Leadership,
problem solving, decision making, strategic planning etc.
(Slide 20) Types of Compensation Variable Pay for Groups

8.  Team-Based Compensation
Incentives for empowered work teams to exceed established goals and share equally in
rewards.
Depends on:
clarity of team purpose and goals
ability of the team to obtain needed resources
effective team communication skills and trust
 Group Incentives
Incentives can be offered to groups, rather than individuals, when employees' tasks are
interdependent and require cooperation.
(Slide 21) Types of Compensation
Organization‐wide incentive - A motivation system that rewards all facility members
based on how well the entire group performed.
 Scanlon Plan - An organization‐wide incentive program focusing on cooperation
between management and employees through sharing problems, goals, and ideas.
 IMPROSHARE - An incentive plan that uses a specific mathematical formula for
determining employee bonuses.
(Slide 22) Executive Compensation Programs
40% Long-term incentives – individually usually in a form of stock options. Short- term
incentives based on profit or sales, paid in cash or stock.
30% Base salary - fix
10% Benefits -
20% Annual Incentives
(Slide 23) Supplemental Nonfinancial Compensation: Perquisites
Perks may include:
 paid life insurance
 club memberships
 company cars
 expense accounts
 interest-free loans

9.  free financial
 legal and tax counseling
 mortgage assistance
golden parachute - A financial protection plan for executives in case they are severed
from the organization
(Slide 24) International Compensation
Important to understand the statutory requirements of each country. International
compensation packages generally utilize the “balance-sheet approach,” using the four
factors below:
1. Base Pay is similar to the pay of employees in comparable jobs in the home country.
Meaning kung nasa pinas ka na-assign, kung ano yung rate ng sahod dito, ganon din saiyo
kahit foreigner ka. In vice versa, yung mga OFW kapag nasa ibang bansa, malalaki sahod
nila kasi ganon ang rate doon. Kung per day ang rate sa bansa natin yun ang susundin, sa
ibang bansa naman is per hour bale yun ang susundin kapag doon ka nag work.
2. Differentials - Compensation given to offset higher costs of living abroad. Ex. For U.S.,
there is a “hardship differentials” if your job assignment overseas is in countries like
Nigeria, India, and China.
3. Incentives - Inducements given to encourage employees to accept overseas
assignments. These may include monetary payments or services, such as housing, a car,
chauffeur, and other incentives.
4. Assistance Programs - Payment for expenses involved in moving a family abroad and
in providing some services overseas. Ex. temporary living expenses; travel, including
pre-relocation visits and annual home leaves; education allowances for children etc.