COMPENSATION AND BENEFITS

Compensation refers to the act of providing a person with money or other things of
economic value in exchange for their goods, labor, or to provide for the costs of injuries that they
have incurred.
The Compensation is the remuneration given to the employees for the work they do for the
organization. In other words, an employee is entitled to both the financial and the nonfinancial
benefits in return for his contribution to the organization.

THEORIES OF COMPENSATION
To understand which component of compensation is efficient, we need to go through the
theories of compensation. There are three theories of compensation: Reinforcement and
Expectancy Theory, Equity Theory and Agency theory.

1. Reinforcement and Expectancy Theory: This theory is based on the assumption that, the
reward-earning behavior is likely to be repeated, i.e. an employee would do the same thing
again for which he was acknowledged once.
Similarly, in the case of Expectancy Theory, given by Vroom, the employee is
motivated to do a particular thing for which he is sure or is expected that performance will
be followed by a definite reward or an outcome.

2. Equity Theory: According to this theory, there should be equity or the uniformity in the
pay structure of an employees remuneration. If the employee feels he is not being paid
fairly for the amount of work he does in a day will result in lower productivity, increased
turnover and high absenteeism. The remuneration system should comply with three types
of equity:
2.1 Internal Equity: The employee perceives the fairness in different pay for
different jobs based on the nature of work involved, i.e. he must feel that pay differentials
among the jobs are fair.
 2.2 External Equity: The employee should feel the fairness in what they are being
paid is in line with what other players in the same industry are paying to their employees
for the same kind of job.
2.3: Individual Equity: The employee perceives the pay differentials among the
individuals who are performing the same kind of a job and within the same organization.
Usually, an individual with more experience gets high remuneration as compared to the
fresher irrespective of the nature of a job.

3. Agency Theory: This theory states that both the employer and the employee are the
stakeholders of the company, and the remuneration paid to the employee is the agency cost.
The employee will try to get an increased agency cost whereas the employer will try to
minimize it. Hence, the remuneration should be decided in such a way that the interest of
both the parties can be aligned.
Thus, these theories posit that the compensation in the form of salary or wages can
be decided on the basis of the outcome or the behavior of an employee.

BENEFITS

Benefits are an important means of meeting employees' needs and wants. Employers
frequently use optional or supplementary benefits as incentives to promote employee longevity,
by attracting and keeping good workers. However, the primary role of employee benefits is to
provide various types of income protection to groups of workers lacking income.

Employee benefits are indirect means of compensating workers; employees receive these
benefits above and beyond their wages. Unlike wages alone, benefits foster economic security and
stability by insuring beneficiaries against uncertain events such as unemployment, illness, and
injury. Furthermore, some benefit programs serve to protect the income and welfare of Filipino
families. A common distinction between direct forms of employee compensation, such as wages,
and indirect compensation, or benefits, is that the former creates an employee's standard of living,
whereas the latter protects that standard of living.
Mandatory Government Benefits and Contributions

The following government contribution will be automatically deducted from regular

employees based on their salary, with the following benefits:

Social Security System (SSS) benefits

The SSS Employees Compensation (EC) program has been in place to help workers
who encounter work-related illnesses or injury resulting in disability or death. This includes
compensation for: medical services, appliances, and supplies in an accredited hospital;
rehabilitation services, including medical, surgical, and hospital treatment; and income cash
benefit.

Pag-IBIG benefits
This entitles employees to avail of a Housing Loan, Calamity Loan, and Multi-Purpose
Loans that aim to provide financial assistance to their needs.

PhilHealth benefits
Provides financial assistance for inpatient and outpatient hospitalization, as well as Z
Benefit Packages for patients undergoing prolonged hospitalization and expensive
treatments and suffering from Millennium Development Goal (MDG)-related illnesses.

Company Benefits

13th month pay

Retirement pay
Upon the age of 60 years or more, the employee who has served at the establishment
for at least five years may be granted a retirement pay equivalent to at least one-half month of
salary for every year of service. A fraction of at least six months is considered as one whole
year.
 Overtime pay
The employee who renders overtime will be given additional compensation equivalent
to his regular wage plus at least 25% premium.
Overtime pay for holiday or rest day shall be paid an additional compensation from the
rate of the first eight hours on a holiday or rest day plus at least 30%.
On a Special Non-Working day, or rest day, an additional compensation of 30%
premium will be paid in addition to the rate of the first eight hours on holiday or rest day.

Night shift differential (NSD)

Applies to employees who work between 10:00 p.m. and 6:00 a.m. An additional 10%
premium is applied for every hour at work.

Leave Benefits
While sick leave and vacation leave benefits are not specifically stated under the law,
it stipulates that private employees are allowed to provide employees a yearly Service Incentive
Leave of five days with pay. This applies to employees with work tenure of at least one year
within the company.
Maternity Leave
Any pregnant woman employee who has worked with the company for at least
six months will be granted a maternity leave of at least two weeks prior to her due date
(expected date of delivery) and four weeks after normal delivery or miscarriage with
full pay based on her regular salary.
A total of 60 days is granted for government employees, and 60 to 80 days for
employees in the private sector.
The Maternity Leave benefit is effective up to the first four deliveries of the
woman employee working in the company.

Paternity Leave
The R.A No. 8187, or Paternity Leave Act of 1996, grants seven days of fully
paid leave to married fathers. This is effective up to the first four deliveries of the
legitimate spouse.
 Parental Leave for Solo Parents, or Solo Parenting Leave (SPL)
Seven days leave with pay for every year of service, on top of other leave
privileges, e.g. Maternity or Paternity Leave.

Special Leave Benefits for Women

This entitles women who underwent surgery due to gynaecological disorders to
two months leave with full pay, as stipulated in R.A. 9710 or the Magna Carta of
Women. This applies to employees who have rendered at least six months of service
with the company.
On the other hand, victims of violence against women, as stipulated in R.A.
9262 or the Anti-Violence Against Women and Their Children Act of 2004, are entitled
to 10 days leave with full pay.

INCENTIVES

An incentive is something that motivates an individual to perform an action. The study of

incentive structures is central to the study of all economic activities (both in terms of individual
decision-making and in terms of co-operation and competition within a larger institutional
structure). While rewarding an employee with money is effective; money, once spent, can be
forgotten. And not everyone is motivated by money, so non-financial rewards can be important
alternatives.

Examples of incentives:
Recognition incentives often include praising an employee, giving an employee a certificate
of achievement and thanking an employee.
Reward incentives include items such as gifts, gift certificates, monetary rewards and service
awards.
Appreciation incentives may involve events such as sporting activities, company parties,
group lunches and birthday parties.
Salary Increases
 Giving Free Vacations
Big Money Incentives
Keeping Employees Healthy
Having Fun At The Office
Reloadable Gift Cards
Tuition Reimbursement
Employee Appreciation Week
Immediate Vacation Time
Offsite Employee Activities

JOB EVALUATION

A job evaluation is a systematic way of determining the value/worth of a job in relation to

other jobs in an organization. It tries to make a systematic comparison between jobs to assess their
relative worth for the purpose of establishing a rational pay structure.

Methods
There are primarily three methods of job evaluation: (1) ranking, and (2) classification.
While many variations of these methods exist in practice, the three basic approaches are described
here.
1. Ranking method
Perhaps the simplest method of job evaluation is the ranking method. According to this
method, jobs are arranged from highest to lowest, in order of their value or merit to the
organization. Jobs can also be arranged according to the relative difficulty in performing them.
The jobs are examined as a whole rather than on the basis of important factors in the job; the
job at the top of the list has the highest value and obviously the job at the bottom of the list
will have the lowest value. Jobs are usually ranked in each department and then the department
rankings are combined to develop an organizational ranking. The variation in payment of
salaries depends on the variation of the nature of the job performed by the employees. The
ranking method is simple to understand and practice and it is best suited for a small
organization. Its simplicity however works to its disadvantage in big organizations because
 rankings are difficult to develop in a large, complex organization. Moreover, this kind of
ranking is highly subjective in nature and may offend many employees. Therefore, a more
scientific and fruitful way of job evaluation is called for.

2. Classification method (Grading method)

According to this method, a predetermined number of job groups or job classes are
established and jobs are assigned to these classifications. This method places groups of jobs
into job classes or job grades. Separate classes may include office, clerical, managerial,
personnel, etc. Following is a brief description of such a classification in an office.
Class I - Executives: Further classification under this category may be Office Manager,
Deputy Office manager, Office superintendent, Departmental supervisor, etc.
Class II - Skilled workers: Under this category may come the Purchasing assistant,
Cashier, Receipts clerk, etc.
Class III - Semiskilled workers: Under this category may come Stenotypists, Machine-
operators, Switchboard operator etc.
Class IV - Unskilled workers: This category may comprise peons, messengers,
housekeeping staff, Daftaris, File clerks, Office boys, etc.
The job grading method is less subjective when compared to the earlier ranking
method. The system is very easy to understand and acceptable to almost all employees without
hesitation. One strong point in favour of the method is that it takes into account all the factors
that a job comprises. This system can be effectively used for a variety of jobs.

TOTAL COMPENSATION

Total compensation is everything the company provides an employee in exchange for

working. It includes base salary, bonuses, benefits, perks and on-site amenities. Total
compensation indicates that an employee is making two or three times his base salary. A company
may inform you that you are receiving additional compensation, yet rarely discloses the full
amount compensated during the entire year. This lack of disclosure often leads employees to feel
underpaid for their time and services.
COMPENSATION AND BENEFITS

GROUP 4
ANTONIO, JAVY E.
BANGGA, SHARMIE R.
LAPITAN, REGINE IVY P.
YLANAN, ROSSEL ANN JOY M.