BACC Module 8

Compensation

Monetary payment given to employees in exchange for their work, typically in the form of wage or saleries

Benifits

Non-monetary rewards or provisions offered to employees in addition to their compensation, such as health insurance, retirement plans and paid time off

Goals

• increasing employee loyalty

• leverage during union negotiation

• rewarding high performing workers

• Reqruitment and retention

• raising or maintaining employee moral

• achieving internal and external pay equity

Compensation Management Process

• organization’s strategy

• Compensation policy

• Job analysis and evaluation

• Analysis of Contingent Factors

• Design and implementation of the Compensation plan

• Evaluation and review

Analysis of Contingent Factors:

Compensation plan is always formulated in the light of various factors, both external and internal, which affect the operation of human resource management system. Various external factors are conditions of human resources market, cost of living, level of economic development, social factors, pressure of trade unions, and various labor laws dealing with compensation management. Various internal factors are organization's ability to pay and employees’ related factors such as work performance, seniority, skills etc. These factors may be analyzed through wage/salary survey.

Design and Implementation of Compensation Plan:

After going through the above steps, the organization may be able to design its compensation plan incorporating base compensation with provision of wage / salary increase over the period of time, various incentives plans, benefits and perquisites. Sometimes, these are determined by external party, for example, pay commissions for Government employees as well as for public sector enterprises. After designing the compensation plan, it is implemented. Implementation of compensation plan requires its communication to employees and putting this into practice.

Evaluation and Review

Compensation is not a rigid and fixed one but is dynamic since it is affected by a variety of factors which are dynamic. Therefore, compensation management should have a provision for evaluating and reviewing the compensation plan. After implementation of the plan, it will generate results either in terms of intervening variables like employee satisfaction and morale or in terms of end-result variables like increase of productivity. However, this latter variable is more important. The evaluation of compensation plan must be done in this light. If it does not work as intended, there should be review of the plan necessitating a fresh look.

Who Qualifies for Statutory Benefits in the Philippines

• Full-time employees (private sector)

• Regular and probationary employees

• Part-time workers (with pro-rated benefits)

• Female employees (including maternity protections)

Workers Not Covered

• Independent contractors and freelancers

• Short-term casual hires under 6 months

• Self-employed individuals (unless voluntarily contributing to systems like SSS or PhilHealth)

Minimum Wage and Overtime Pay

The minimum wage in the Philippines varies by region and worker type and is regularly adjusted to keep pace with the cost of living. For example, as of January 2025, the National Capital Region (NCR) has a minimum wage of 645 Philippine Pesos (PHP) per day for non-agricultural workers. Under the Labor Code of the Philippines, the standard work day is a maximum of eight hours, plus a one-hour lunch break. Employees who work over eight hours are entitled to overtime pay at a rate of 25% above their average hourly wage. Employees who work six consecutive days are entitled to a 24-hour break. Employers must pay Filipino employees a night shift differential of at least 10% more than their regular hourly rate if they work any hours between 10 p.m. and 6 a.m.

Monthly-paid employees

are those who are paid every day of the month, including unworked rest days, special days, and regular holidays. Factor 365 days in a year is used in determining the equivalent monthly salary of monthly paid employees.

Daily-paid employees

are those who are paid on the days they actually worked and on unworked regular holidays.

Wage of Workers Paid by Results

All workers paid by results, including homeworkers and those who are paid on piecework, takay, pakyaw or task basis, shall receive not less than the prescribed minimum wage rates under the Regional Wage Orders for the normal working hours which shall not exceed eight (8) hours a day, or a proportion thereof for work less than the normal working hours. To ensure the payment of fair and reasonable wage rates, the wage rates of workers who are paid by results as may be determined through time and motion studies or in consultation with representatives of employers’ and workers’ organizations.

A Piece-Rate Order or Production Standard Order shall be issued by the DOLE Regional Director, in his capacity as DOLE Chairperson, based on the recommendation of the Secretariat of the RTWPB as a result of the time and motion study conducted in the workplace of the applicant. It should be adjusted every time a new Wage Order is issued by the RTWPB to ensure that piece rates correspond to the applicable minimum wage.

Subsidized Meals and Snacks

The employer may provide subsidized meals and snacks to his employees provided that the subsidy shall not be less than 30% of the fair and reasonable value of such facilities. In such case, the employer may deduct from the wages of the employees not more than 70% of the value of the meals and snacks enjoyed by the employees, pursuant to the Facility Evaluation Order issued by the RTWPB concerned. (Sec. 4, Rule VII-A, Book III of the Rules Implementing the Labor Code) For the computation of the fair and reasonable value of the meals given, the employer may seek assistance from concerned Regional Tripartite Wages and Productivity Board (RTWPBs) for the conduct of facility evaluation.

Service charges

to the amount collected by establishments, such as hotels, restaurants and other similar establishments, that is added to the bills for work or services rendered.

This applies to all employees, except managerial employees as defined by law, under the direct employ of the establishment, regardless of their positions, designations or employment status, and irrespective of the method by which their wages are paid.

Distribution of Service Charges

All service charges actually collected shall be distributed completely and equally, based on actual hours or days of work or service rendered, among the covered employees, including those already receiving the benefit of sharing in the service charges.

Frequency of Distribution

The service charges collected shall be distributed and paid to the covered employees once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days.

Holiday Pay

Every employee covered by the Holiday Pay Rule is entitled to the minimum wage rate. This means that the employee is entitled to at least 100% of his/her minimum wage rate even if he/she did not report for work, provided he/she is present or is on leave of absence with pay on the work day immediately preceding the holiday. Work performed on that day merits at least twice (200%) the daily wage of the employee. The above mentioned is without prejudice to any voluntary practice or provision in the Collective Bargaining Agreement (CBA) providing or payment of wages and other benefits for days declared as special days even if unworked.

Where the holiday falls on the scheduled rest day of the employee, work performed on said day merits at least an additional 30% of the employee’s regular holiday rate of 200% or a total of at least 260%

When a regular holiday falls on a Sunday, the following Monday shall not be a holiday, unless a proclamation is issued declaring it a special day.

When Araw ng Kagitingan falls on the same day as Monday Thursday or Good Friday, a covered employee is entitled to at least two hundred percent (200%) of his/her daily wage even if said day is unworked. Where the employee is required to work on that day, he/she is entitled to an additional 100% of the daily wage.

Thirteenth-month pay

refers to one-twelfth of the total basic salary earned by an employee within a calendar. All employers are required to pay their rank-and- file employees thirteenth-month pay, regardless of the nature of their employment and irrespective of the methods by which their wages are paid, provided they worked for at least one (1) month during a calendar year.

Separation pay

It is a compensation given to an employee who is terminated from employment due to authorized causes provided in Articles 298 and 299 of the Labor Code of the Philippines, as renumbered.

This benefit applies to an employee in instances of authorized termination of employment covered by Articles 298 and 299 of the Labour Code of the Philippines. An employee’s entitlement to separation pay depends on the reason or ground for the termination of his or her services. Where the termination is for authorized causes, separation pay is due.

Maternity leave

refers to the paid leave granted to a female employee for every instance of pregnancy, miscarriage, and emergency termination of pregnancy, regardless of frequency, providing her an ample transition time to regain health and overall wellness and to assume maternal roles. B.

This benefit applies to female employees, regardless of civil status, employment status, and the legitimacy of her child.

Duration

The maternity leave shall be for one hundred five (105) days with full pay, and an additional fifteen (15) days with full pay in case the female employee qualifies as a solo parent under RA 8972, as amended by RA 11861. In cases of live childbirth, an additional maternity leave of thirty (30) days without pay can be availed of, at the option of the female employee, provided that the employer shall be given due notice. Further, this leave benefit may also be credited as combination of prenatal and postnatal leave as long as it does not exceed one hundred five (105) days and provided that compulsory postnatal leave shall not be less than sixty (60) days. In case of miscarriage or emergency termination of pregnancy, the maternity leave shall be for sixty (60) days with full pay. In both cases, employers from the private sector shall pay for the difference between the full salary and the actual cash benefits received from the SSS.

Paternity leave

refers to the paid leave granted to a married male employee allowing him to lend support to his lawful wife during her period of recovery and/or in nursing of their newborn child, including miscarriage. B. Coverage This benefit applies to all married male employees, regardless of their employment status (e.g., probationary, regular, contractual, project basis).

Duration: The paternity leave grants male employees his full pay for the seven (7) days during which he is allowed not to report for work. This is granted to an employee after the delivery by his wife, without prejudice to an employer allowing an employee to avail of the benefit before or during the delivery; Provided, that the total number of days shall not exceed seven (7) days for each delivery. In the event that the paternity leave is not availed of, said leave shall not be convertible to cash. Where a male employee is already enjoying the paternity leave benefits by reason of contract, company policy or collective bargaining agreement, the following rules shall apply: a. If the existing paternity leave benefit is greater than the benefit herein provided, the greater benefit shall prevail; and b. If the existing paternity leave is less than that provided herein, such existing benefit shall be adjusted to the extent of the difference. However, where a contract, company policy or collective bargaining agreement provides for an emergency or contingency leave without specific provisions on paternity leave, the paternity leave

Parental leave

refers to the paid leave granted to a qualified solo parent to enable the performance of parental duties and responsibilities where physical presence is required or beneficial to the child.

Special leave for women

refers to the paid leave granted to a female employee allowing her to recuperate following surgery caused by gynecological disorders for a period of up to two (2) months.

Retirement pay

refers to the compensation given to a retiring employee pursuant to Article 302 of the Labor Code of the Philippines, as renumbered.

Coverage

Employees shall be retired upon reaching the age of sixty (60) years or more but not beyond sixty-five (65) years old [and have served the establishment for at least five (5) years]. This benefit applies to all employees except: 1. Government employees; and 2. Employees of retail, service and agricultural establishments/ operations regularly employing not more than ten (10) employees.

Amount

The minimum retirement pay shall be equivalent to one- half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one (1) whole year.

Temporary total disability (TTD)

For a disability that prevents an employee from performing his work for a continuous period not exceeding 120 days. The amount of daily income benefit shall be ninety percent (90%) of the employee’s average daily salary credit as determined by the Systems.

Permanent total disability (PTD)

A monthly income benefit granted for disabilities, such as, but not limited to, complete loss of sight of both eyes, loss and function loss of both limbs, and brain injury resulting to imbecility or insanity. The amount of monthly income benefit for PTD shall be determined by the Systems based on the average monthly salary credit or average monthly compensation (AMSC/AMC).

Permanent partial disability (PPD)

A monthly income benefit is granted for disabilities that result in physical loss (amputation) or functional loss of a body part. The number of monthly pensions is based on the corresponding body part loss or functional loss, as provided under Article 193 of PD No. 626, as amended, and EC schedule of compensation.

Medical benefits

It includes reimbursement of the cost of medicines for the illness or injury, payment to providers of medical care, hospital care, surgical expenses, and the costs of rehabilitation appliances and supplies. The medical services are limited to ward services of hospitals duly accredited by the Department of Health (DOH).