COMPEN

Wage

Payment given to an employee usually based on the number of hours or days worked.

Salary

A fixed amount of compensation regularly paid to an employee, usually monthly, regardless of the exact number of hours worked.

Wage vs. Salary

Wage is commonly based on hours or days worked, while salary is a fixed regular amount usually paid monthly.

Minimum Wage

The lowest amount of wage that an employer is legally allowed to pay an employee.

Overtime Pay

Additional compensation given for work performed beyond the normal eight-hour workday.

Night Shift Differential

Additional pay given to employees who work during the night shift, generally between 10:00 PM and 6:00 AM.

Holiday Pay

Compensation provided to qualified employees during regular holidays according to labor laws.

Premium Pay

Additional compensation for work performed on rest days, special days, or certain holidays.

13th Month Pay

A mandatory benefit generally equivalent to at least one-twelfth of the employee's total basic salary earned within the calendar year.

Service Incentive Leave

A benefit generally providing qualified employees with five days of paid leave after at least one year of service.

De Minimis Benefits

Small-value benefits or facilities provided by employers to employees that may be exempt from income and withholding taxes when they meet the limits and conditions set by tax regulations.

Guideline for De Minimis Benefits

They must fall under the types of benefits recognized by tax regulations and remain within the prescribed limits to qualify for tax exemption.

Rewards

Financial and non-financial returns employees receive in exchange for their work, contribution, and performance.

Total Rewards Strategy

A planned approach that combines compensation, benefits, recognition, development, and work-life programs to attract, motivate, and retain employees.

Benefits

Additional financial or non-financial advantages employees receive aside from their basic pay.

Base Pay

The fixed or regular amount of money an employee receives for performing a job.

Merit Pay

An increase in an employee's pay based on individual performance or achievement.

Incentive

Additional reward given to encourage employees to achieve specific goals or higher performance.

Promotion

The movement of an employee to a higher position with greater responsibilities, authority, and usually higher compensation.

Pay Increase

An increase in an employee's existing salary or wage due to performance, promotion, market changes, or other factors.

Health and Welfare

Benefits and programs designed to protect and improve employees' physical, mental, and overall well-being.

Paid Time Off

Time away from work during which an employee continues to receive pay, such as vacation or certain types of leave.

Retirement

Benefits or programs that provide financial support to employees after they permanently leave the workforce.

Training

Activities designed to improve employees' knowledge and skills needed to perform their current jobs.

Career Development

Programs and opportunities that help employees develop their abilities and prepare for future career growth.

Performance Management

A continuous process of setting expectations, monitoring performance, providing feedback, and improving employee performance.

Recognition

Acknowledgment or appreciation given to employees for their achievements, contributions, or good performance.

Program Administration

The planning, implementation, communication, and monitoring of compensation and employee reward programs.

Flexible Work Schedules

Work arrangements that allow employees some flexibility regarding when, where, or how they perform their work.

Compensation and Benefits

The combination of monetary payments and additional benefits employees receive in exchange for their work.

Phases of a Total Rewards Program

Assessment, design, implementation, communication, and evaluation of the organization's total rewards practices.

Assessment Phase

The organization examines employee needs, current reward programs, business goals, and problems before developing the total rewards program.

Design Phase

The organization decides what compensation, benefits, recognition, development, and other rewards should be included in the program.

Implementation Phase

The organization puts the designed total rewards program into actual practice.

Communication Phase

The organization clearly explains the total rewards program and its benefits to employees.

Evaluation Phase

The organization measures whether the total rewards program is effective and makes improvements when necessary.

Benefit of Total Rewards – Employee Attraction

A competitive total rewards package helps an organization attract qualified applicants.

Benefit of Total Rewards – Employee Retention

Good compensation, benefits, recognition, and development opportunities encourage employees to stay with the organization.

Benefit of Total Rewards – Motivation

Rewards encourage employees to improve their effort and performance.

Benefit of Total Rewards – Employee Engagement

Employees may become more committed and involved when they feel properly rewarded and valued.

Benefit of Total Rewards – Productivity

Effective rewards can encourage employees to perform better and contribute more to organizational goals.

Advantage of Total Rewards – Competitive Advantage

A strong rewards package can make an organization more attractive than competing employers.

Advantage of Total Rewards – Higher Motivation

Employees may become more motivated when good performance is properly rewarded.

Advantage of Total Rewards – Lower Turnover

Competitive rewards and development opportunities can reduce employees' desire to leave the organization.

Disadvantage of Total Rewards – High Cost

Providing competitive compensation, benefits, training, and other rewards can be expensive.

Disadvantage of Total Rewards – Complex Administration

Managing several types of rewards and benefits requires careful planning and administration.

Disadvantage of Total Rewards – Different Employee Preferences

A reward valued by one employee may not be equally important to another employee.

Compensation System

A structured method used by an organization to determine and provide pay, benefits, incentives, and other rewards to employees.

Internal Equity

Fairness of pay among jobs and employees within the same organization based on their responsibilities, skills, and value.

Job Ranking

A job evaluation method that arranges jobs from highest to lowest according to their overall importance or value to the organization.

Job Grading

A method of grouping jobs into predetermined grades or classes based on similar responsibilities, difficulty, and qualifications.

Point System

A job evaluation method that assigns points to compensable factors such as skills, responsibilities, effort, and working conditions.

Support Workflow

The sequence of supporting activities and responsibilities that helps work move efficiently throughout the organization.

Pay Structure

A system of pay grades, ranges, and levels used to determine how much different jobs should be paid.

Job Analysis

The systematic process of collecting information about a job's duties, responsibilities, skills, qualifications, and working conditions.

Job Evaluation

A systematic process of determining the relative value or worth of different jobs within an organization.

Pay Policies

Guidelines established by an organization regarding how employees will be compensated.

Performance Appraisal

The formal assessment of an employee's work performance during a particular period.

Pay Survey

A collection and comparison of salary and wage information from other organizations or the labor market.

Knowledge-Based Pay

A compensation system that rewards employees according to the knowledge or skills they acquire and can apply to their work.

Survey

A method of gathering information from people using questions or questionnaires.

Advantage of Internal Equity – Fairness

Employees performing jobs with similar value are compensated fairly within the organization.

Advantage of Internal Equity – Employee Motivation

Employees may become more motivated when they believe the organization's pay system is fair.

Advantage of Internal Equity – Clear Pay Structure

It creates an organized system for determining differences in compensation among positions.

Disadvantage of Internal Equity – Limited Market Focus

Focusing too much on internal fairness may cause the company to overlook salary levels offered by competitors.

Disadvantage of Internal Equity – Difficult Job Comparison

Comparing jobs with very different responsibilities and skills can be complicated.

Disadvantage of Internal Equity – Possible Employee Disagreement

Employees may disagree with how management evaluates the value of their jobs.

Compensation Management Process

The process of analyzing jobs, evaluating their value, studying market pay, creating a pay structure, implementing compensation, and regularly reviewing the system.

Compensation Management Example

A company analyzes the HR Assistant position, evaluates its responsibilities, compares its salary with market rates, assigns an appropriate pay grade, and regularly reviews the salary.

External Equity

Fairness of an organization's compensation compared with what other employers in the labor market pay for similar jobs.

International Labor Force

Workers from different countries who participate in the global labor market and may influence the supply, demand, and cost of labor.

Economic Condition

The overall condition of the economy, including inflation, unemployment, economic growth, and cost of living, which can influence compensation.

Government

The public authority that creates and enforces labor laws, minimum wage rules, taxes, and employment regulations affecting compensation.

Labor Union

An organization of workers that represents employees and negotiates with employers regarding wages, benefits, and working conditions.

Competitive Market

The environment where organizations compete for customers, resources, and qualified employees.

Industry Sector

A group of businesses engaged in similar types of economic activities, such as banking, manufacturing, or hospitality.

Organization Size

The scale of a company based on factors such as number of employees, operations, revenue, and resources, which may influence its ability to provide compensation.

Union Status

Whether employees or a workplace are represented by a labor union, which may influence wages and benefits through collective bargaining.

Geographic Location

The place where a job is located, which can influence compensation because of differences in cost of living and local labor markets.

Factor Affecting Wage Differences – Education and Skills

Workers with specialized education, knowledge, or skills may receive higher wages. Example: A licensed accountant may earn more than an entry-level office assistant.

Factor Affecting Wage Differences – Experience

Employees with greater relevant work experience may receive higher compensation. Example: An HR manager with ten years of experience may earn more than a newly hired HR officer.

Factor Affecting Wage Differences – Job Responsibility

Jobs involving greater responsibility and decision-making usually receive higher compensation. Example: A department manager normally earns more than a staff member.

Factor Affecting Wage Differences – Industry

Wages can differ depending on the industry where employees work. Example: An IT specialist in the technology sector may receive a different salary from one working in a small retail company.

Factor Affecting Wage Differences – Geographic Location

Pay may differ because living costs and labor market conditions vary by location. Example: Salaries in Metro Manila may differ from salaries for similar jobs in some provinces.

Factor Affecting Wage Differences – Labor Supply and Demand

When qualified workers for a particular job are scarce but demand is high, employers may offer higher wages. Example: Companies may offer competitive salaries for highly demanded IT professionals.

Factor Affecting Wage Differences – Company Size and Ability to Pay

Larger or more profitable organizations may have greater resources to provide higher compensation than smaller businesses.

Factor Affecting Wage Differences – Employee Performance

Employees with stronger performance may receive merit increases, bonuses, or other additional compensation.

External Factor – Labor Market

The availability and demand for workers influence the amount employers need to offer to attract employees.

External Factor – Economic Conditions

Inflation, unemployment, and economic growth affect an organization's compensation decisions.

External Factor – Government Regulations

Labor laws, minimum wage requirements, and other regulations establish standards organizations must follow.

External Factor – Competitors

The compensation offered by competing employers influences how much an organization may need to offer to remain competitive.

External Factor – Cost of Living

Organizations may consider differences in living expenses when establishing compensation in different locations.

External Factor – Labor Unions

Collective bargaining and union agreements can influence wages, benefits, and working conditions.

Reason for External Equity – Attract Employees

Competitive compensation helps organizations attract qualified applicants.

Reason for External Equity – Retain Employees

Employees are less likely to leave when they believe their compensation is competitive with the external labor market.

Reason for External Equity – Reduce Turnover

Competitive market pay can reduce employees leaving for better-paying employers.

Reason for External Equity – Remain Competitive

Organizations need to consider market compensation so they can compete effectively for skilled workers.

Reason for External Equity – Employee Satisfaction

Employees are more likely to feel fairly compensated when their pay is reasonable compared with similar jobs in the market.

Pay Model

The framework used to design compensation based on internal alignment, external competitiveness, employee contributions, and management of the pay system.