Compensation and benefits Management

Course objective
• Learn how to manage the compensation and benefit in the corporate setting
• Understanding the process of creating pay structure through job evaluation
• Be able to learn how to compute the different component of payroll
• Design an effective incentive and rewards program

➢ Fix payment
 Fixed salary (mandated by labor code)
➢ Variable payment
 Criteria
 Condition
 Target goal
 Not covered by labor code

Course outline
Seminar highlight
• Track 1: Overview of compensation
○ person
• Tract 2: Job Evaluation
○ performance
• Tract 3: Component of payroll
○ sallary
• Tract 4: Designing Benefits and Rewards Program

Compensation management
The systematic development of policies and procedures to determine job
values, identify market rates, to design salary structure and to communicate and
implement effective reward systems, thus attracting and retaining well-qualified
and highly motivated

• Job values
➢ Level important
 Example
• Janitor vs. Manager
• Market rates
➢ Comparison of salary to other company
• Creating reward
○ Money
○ Non money
• Retaining well qualified
○ Qualified
○ Retained condition
○ Compensation

Component of compensation management

• Job analysis
 ○ Job description
• Done by bosses and head
• Outline description
○ Job specification
• Qualification
• Training
• Job evaluation
○ Focus job
○ Job grade
○ Hierarchy
○ Once or twice in year
• Performance evaluation
○ Job holder
○ Performance rating
○ Monitor performance
○ Rating
○ More than time
○ Rates
• Salary survey
○ Market rate
○ Other rate to company
• Pay for performance
○ Meet certain performance
○ Incentive( if target meet)

Significant factors affecting compensation management

• Supply and demand for employee

○ In demand skill
 High payment
○ Different to other employee
○ Highly qualified
○ Skill compensation
• Labor organization
○ Union
 Cba ( Collecting bargaining agreement
○ Non-union
 Depending to the company and employee

• Company financial condition

○ The accountant or controller may show some progress of the company
• Productivity
○ Meet the target
○ Having benefit
 Example health insurance
 Union ( 60 employer and 40 employee
 Non union ( 100% employer)

Difference between various forms of compensation

Type of compensation Purpose Intended recipient

Base salary Payment for doing job Every employee in the

company

Incentive Payment for doing a job A few good performance

well

Benefits Payment for staying in the Those who are mandated

job by law

• Base salary
○ Every employee should have
• Incentive
○ Job well done
○ Target meet
○ Few good people perform
○ Difference between other employee
• Benefits
○ Sss
○ Sick leave
 Convert to cash if not use
Dimension of compensation philosophy

• Pay performance
○ Basic salary
• Market competitive
○ Incentive

Job evaluation
• Job analysis and job evaluation
• Designing the pay structure
• Creating salary administration policies

*should have chart to determining task and pay formance

Job analysis
A systematic nvestigation on the tasks, duties and responsibilities required in the
job and the necessary skills, knowledge and abilities some need to perform the job
adequately

Uses of job analysis

•
• Job definition
• Job redesign
• Recruitment
 • Selection & placement
• Orientation
• Training
• Career counseling
• Employee safety
• Performance appraisal
• Compensation

Process of Job Analysis

Job Analysis
Job description
Job specification
Job evaluation

Methods of gathering information

• Interview
○ Done by manager or HR
• Questionnaire
○ Should have standard question
• Observation
○ Technical
○ Production

Job Description
• Job description is a summary of the functions, duties and responsibilities of a
given job
• Use a job description
○ Reference in recruitment
○ Orientation of employees
○ Job evalution
○ Reference in setting performance goals
Steps in developing job description
• Conduct job analysis
• Identify position title and reporting relationships based on organization chart
• Define job objective
• List down duties and responsibility
• List down minimum qualification for the job
• Secure approval of supervisor and manage

Job evaluation
• Defined as the systematic process of determining the relative worth of their
job
• “when employees are paid according to the worth of jobs they are holding it
is presumed that those with similar jobs have the same level of
performance.”

Objective of Job Evaluation

• Put group positions in their proper categories
• Maintain a scale for new employee transferees, and promotion
 • Allow reasonable flexibility in coping with changes in the salary structure
• Facilitate HR accounting and budgeting
• Ensure that payment of wages salaries among the various structure does not
go out of bound
Job evaluation
• Ranking
• Classification
• Factor comparison
• Point factor
The position of salary
• Creating policy of promotion
• Salary should increased if there is promotion
○ Promotion 1 year of service
○ Exception to the rule: if the employee is hard working
Note: accountant should have initial budgeting

Point factor:
• Example

factor Weightage Points

Know how 40% 400

Problem solving 30% 300

Accountability 30% 300

Salary depend to the status of the employee and evaluation

Other point factor

• Skill
○ Education
○ Experience
• Effort
○ Physical
○ Mental
• Responsibility
○ Decision making
• Working condition
○ Work pressure- having deadline
○ Hazard
○ Danger of exposure

Designing pay structure

• Pay-level decision
 ○ The level at which the organization wants to complete in the labor
market
• Pay- structure decision
○ Setting a value for each job within the organization to all other jobs
• Individual pay decision
○ The pay of employee working on the same job within the company

Indices of good wage structure

• Wage rate are internally consistent ie. That they are based of each job as
related to all other jobs within the organization
○ Job evaluation – having classification

• Wage rate are externally consistent and they compare favorably with
averages in the industry as well as in the community
○ Salary survey
Labor code:
Hrs or works – 8 hours pay work ( 15 mins morning break and 15 mins afternoon
coffee break with pay)
1 hrs lunch break ( not paid)
Total hour 9 hrs per day

Minimum work day is 5 day with a maximum day of 6 days per week
Always have 1 day off in a week

Payroll component
• Labor code compliance
• Payroll computation
• Basic minimum wage

Basic of minimum wage

• The basis of the minimum wage
Labor code compliance on wages and working hours
• Minimum wage
• Hours and conditions of work
• Overtime pay
• Night shift deferential
• Weekly rest period
• Holiday pay
• Service charge
• Employees compensation ( EC) benefits

Payroll component
• Attendance management ( Timekeeping)
• Leaves management
• Payroll processor
computation:
sample computation : using 350 as basic daily rate and 43.75 as basic hourly rate

1. Regular working day with overtime pay

a. 125% of 43.75 = 1.25 x 43.75 = 54.69 OT/HR
2. Regular working day with night differential pay
a. 110% of 350 = 385
3. Regular working day with night differential and overtime pay
a. 110% of ( 125% of 43.75) = 1.1 x(125x43.75) = 60.16 ot/hr
4. Work performed on the rest day/ Sunday/special holiday
a. 130% = 1.3 x 350 = 455
5. Overtime pay on rest day/Sunday/special holiday
a. 130% = 1.3 x(1.3x43.75)
= 1.3 x 56.88
= 73.94 OT/hr
6. Night differential pay on a restday/Sunday/special holiday
a. 110% of (130% of 350) = 1.1 x (1.3 x 350)
= 1.1 x 455
=1.1 x 455
= 500.50 rate / day
7. For overtime shift work falling on the restday/ Sunday/special holiday
a. 169% of 43.75 + 10 % of ( 169% of 43.75)
= 73.94 + (.10 x 73.94)
=73.94 +7.39
=81.33
8. For work performed on a special holiday falling on a rest day
a. 150% of 350
= 1.5x350
= 525
9. Overtime pay on a special holiday falling on a restday
a. 150% of 43.75 + 30%(150%of 43.75)
=1.5x43.75 +(.30x65.63)
=65.63+19.69
=85.32 OT/HR
10.For regular night shift on special holidays falling on a rest day
a. 110% x (150% of 43.75)
=1.1 x (1.5 x43.75)
=1/1 x 65/53
=72.19 OT/HR
11.Overtime pay on the regular holiday
 a. 130% of (200% of 43.75)
= 1/3 x (2/0 x 43/75)
=1.3 x 87.50
=113/75 OT/Hr
12.For regular night shift falling on a regular holiday
a. 110% of (200% of 43.75)
=1.1 x (2.0x43.75)
=96.25/hr
13.For overtime shift falling on a regular holiday
a. 260% of 43.75+10% of ( 260% of 43.75)
= (2.6 x 43.75)+.10x(2.6x43.75)
= 113.75 + (.10 x 113./75)
= 113.75 + 11.38
=125.13 OT/hr
14.For work performed on a regular holiday falling on a restday
a. 200% +(30% of 200%) of 350
= (2.0 + 60)x350
= 2.60 x 350
=910
15.Overtime pay on a restday which falls on a regular holiday
a. 130 % of (260 % of 43.75)
=1.3 x (2.6 x 43.75)
=1.3 x 113.75
=147.88 OT/hr
16.For night shift work on regular on a regular holiday which falls on a restday
a. 110% of (260 % of 43.75)
= 1.1 x (2.6x43.75)
=1.1 x 113.75
=125.13 hr

Payroll output: Payslip Items

• Cut-off period/ Pay out date

• Salary / pay grade
• Emp. ID. Department/ Division
• Basic pay/ income
• Gross pay
• Deduction
○ Gov’t Mandated Dedution
○ Company- related deductions
○ Benefits ( if any)
• Incentives/commissions
• Net pay
• Tax exemption