Compensation and Benefits

Total Compensation Equation

A + B + D = EWhere:

A. Guaranteed Cash (Regular salary, fixed and guaranteed allowance, fixed and guaranteed bonuses, or 13th month pay)

B. Variables or discretionary compensation• Commissions, profit shares, performance bonus,

management incentive

C. Total Cash (A + B)

D. Benefits

E. Total Renumeration (C + D)

(Sison, 2003)

Benefits

• Social Security• Health Insurance/Health Plan• Life Insurance/Accident Insurance• Retirement benefits• Car and Car-related benefits• Allowances (Meals and Transportation; Stand-

by allowance, provincial allowance, Clothing, etc)

• Leave benefits (VL, SL, Nuptial, Maternity, Paternity, Birthday, Emergency, Sabbatical, Union)

Examples of Additional Pay Benefits(CENTRO ESCOLAR UNIVERSITY)

• Longevity Pay• Summer Pay• Class Advisers Pay• Enrolment Advisers Pay• Big Classes Pay• Mid-year Bonus• Christmas Bonus• Incentive Leave Pay• Holiday Pay• Special Examination Pay

Examples of Benefits Package(MERALCO BENEFITS PACKAGE)

• Medical, Dental and Hospitalization• Interest-Free Educational Loan• Health Maintenance Plan• Shuttle Bus Service• Housing Programs• Recreation and Sports Facilities• Central and Satellite Libraries• Canteen/ Commissary services• Theater Facilities

Compensation Systems

BASIS FORM

Task

Status

Skills

Seniority

Performance

Star roles;Market-based results

Job analysis:Job value (worth) – job pricing

e.g. piece-rate

Type and complexity of knowledge required;Number of employees supervised

Local market conditions;“Value-to-the firm” compensation

Demand & Supply conditions

NORM OF EQUITY: Belief that employees should be paid according to their contributions to the organizations.

“Appropriate” compensation

MARKET FORCES

“Extraordinary” compensation

Age & Experience

CULTURE SIZE & STRUCTURE

“Competency-based”

Compensation

Range & Levels

Job classification

“Broadbanding”

Money

Intrinsic/Psychic

Other economicforms

Perquisites

Equity;Stock

Ownership;Profit shares

Benefits

Car;Expense accnt;

Other perks

StatusIndependence;

Power

Paid time off;Insurance;Retirement;Others (e.g. childcare)

Symbols of gift exchange

Tenure-based pay

SALARIES AND BENEFITS

Compensation Systems: Issues & Concerns

• Whether to rely on direct, shorter term economic incentives vs. longer term economic rewards;

• Amount of information provided to employees on compensation and reward distribution (Pay secrecy)

Compensation Systems: Issues & Concerns

• The extent to which reward systems can be used as a powerful social and psychological force to motivate people and influence reactions.

• The application of “cafeteria benefits approach” as a scheme for structuring employee benefits

• Salaries vs. Wages