COMPENSATION AND RECOGNITION
A. EMPLOYEE COMPENSATION
Compensation refers to any payment given by an employer to an employee during their period of
employment. In return, the employee will provide their time, labor, and skills. This compensation can be in
the form of a salary, wage, benefits, bonuses, paid leave, pension funds, and stock options, and more.
Compensation is also sometimes referred to as remuneration
Compensation is a systematic approach to providing monetary value to employees in exchange for work
performed. Compensation may achieve several purposes assisting in recruitment, job performance, and
job satisfaction.
According to Gary Dessler, employee compensation refers to all forms of pay going to employees and
arising from their employment.
Compensation is a tool used by management for a variety of purposes to further the existance of the
company. Compensation may be adjusted according the the business needs, goals, and available
resources.
Compensation may be used to:
1. recruit and retain qualified employees
2. increase or maintain morale/satisfaction
3. reward and encourage peak performance
4. achieve internal and external equity
5. reduce turnover and encourage company loyalty
6. modify (through negotiations) practices of unions.
Components of a Compensation System
Various compensation systems have developed to determine the value of positions. These systems utilize
many similar components including job descriptions, salary ranges/structures, and written procedures. The
components of a compensation system include:
1. Job Descriptions. A critical component of both compensation and selection systems, job
descriptions define in writing the responsibilities, requirements, functions, duties, location,
environment, conditions, and other aspects of jobs. Descriptions may be developed for jobs
individually or for entire job families.
2. Job Analysis. The process of analyzing jobs from which job descriptions are developed. Job
analysis techniques include the use of interviews, questionnaires, and observation.
3. Job Evaluation. A system for comparing jobs for the purpose of determining appropriate
compensation levels for individual jobs or job elements. There are four main techniques: Ranking,
Classification, Factor Comparison, and Point Method.
4. Pay Structures. Useful for standardizing compensation practices. Most pay structures include
several grades with each grade containing a minimum salary/wage and either step increments or
grade range. Step increments are common with union positions where the pay for each job is pre-
determined through collective bargaining.
Under Salary Standardization Law, government employees’ pay structures (effective January 1, 2024)
are shown below.
SALARY
STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 STEP 6 STEP 7 STEP 8
GRADE
1 13,530 13,530 13,530 13,530 13,530 13,530 13,530 13,530
2 14,372 14,372 14,372 14,372 14,372 14,372 14,372 14,372
3 15,265 15,265 15,265 15,265 15,265 15,265 15,265 15,265
4 16,209 16,209 16,209 16,209 16,209 16,209 16,209 16,209
5 17,205 17,205 17,205 17,205 17,205 17,205 17,205 17,205
6 18,255 18,255 18,255 18,255 18,255 18,255 18,255 18,255
7 19,365 19,365 19,365 19,365 19,365 19,365 19,365 19,365
8 20,534 20,534 20,534 20,534 20,534 20,534 20,534 20,534
9 22,219 22,219 22,219 22,219 22,219 22,219 22,219 22,219
10 24,381 24,381 24,381 24,381 24,381 24,381 24,381 24,381
11 28,512 28,512 28,512 28,512 28,512 28,512 28,512 28,512
12 30,705 30,705 30,705 30,705 30,705 30,705 30,705 30,705
13 32,870 32,870 32,870 32,870 32,870 32,870 32,870 32,870
14 35,434 35,434 35,434 35,434 35,434 35,434 35,434 35,434
15 38,413 38,413 38,413 38,413 38,413 38,413 38,413 38,413
16 41,616 41,616 41,616 41,616 41,616 41,616 41,616 41,616
17 45,138 45,138 45,138 45,138 45,138 45,138 45,138 45,138
18 49,015 49,015 49,015 49,015 49,015 49,015 49,015 49,015
19 53,873 53,873 53,873 53,873 53,873 53,873 53,873 53,873
20 60,157 60,157 60,157 60,157 60,157 60,157 60,157 60,157
21 67,005 67,005 67,005 67,005 67,005 67,005 67,005 67,005
22 74,836 74,836 74,836 74,836 74,836 74,836 74,836 74,836
23 83,659 83,659 83,659 83,659 83,659 83,659 83,659 83,659
24 94,132 94,132 94,132 94,132 94,132 94,132 94,132 94,132
25 107,208 107,208 107,208 107,208 107,208 107,208 107,208 107,208
26 121,146 121,146 121,146 121,146 121,146 121,146 121,146 121,146
27 136,893 136,893 136,893 136,893 136,893 136,893 136,893 136,893
28 154,320 154,320 154,320 154,320 154,320 154,320 154,320 154,320
29 173,962 173,962 173,962 173,962 173,962 173,962 173,962 173,962
30 196,199 196,199 196,199 196,199 196,199 196,199 196,199 196,199
31 285,813 285,813 285,813 285,813 285,813 285,813 285,813 285,813
32 339,921 339,921 339,921 339,921 339,921 339,921 339,921 339,921
33 428,994 428,994 428,994 428,994 428,994 428,994 428,994 428,994
Source: National Budget Circular (NBC) No. 594, s. 2024 (August 12, 2024)
Government plantilla position can be viewed through this link: https://governmentph.com/salary-grade-
table-government-plantilla-positions/
5. Salary Surveys. Collections of salary and market data. May include average salaries, inflation
indicators, cost of living indicators, salary budget averages. Companies may purchase results of
surveys conducted by survey vendors or may conduct their own salary surveys. When purchasing
the results of salary surveys conducted by other vendors, note that surveys may be conducted
within a specific industry or across industries as well as within one geographical region or across
different geographical regions. Know which industry or geographic location the salary results pertain
to before comparing the results to your company.
Types of Compensation
There are different types of compensation. Schuler identified three major types of compensation,
which are mentioned below;
1. Non-monetary Compensation.
2. Direct Compensation.
3. Indirect Compensation.
Non-monetary Compensation. It includes any benefit that an employee receives from an employer or a
job that does not involve tangible value. Examples are career development and advancement opportunities,
opportunities for recognition, as well as work environment and conditions.
Direct Compensation. Direct Compensation comprises of the salary that is paid to the employees along
with the other health benefits. Money is included under direct compensation. It is an employee’s base wage
which can be an annual salary or hourly wage and any performance-based pay that an employee receives.
Direct compensation consisting of pay received in the form of wages, salaries, bonuses, and commissions
provided at regular and consistent intervals. These include the basic salary, house rent allowances, medical
benefits, city allowances, conveyance, provident funds, etc. It also includes bonuses, payments for
holidays, etc.
Indirect Compensation. Indirect compensation can be thought of as the non-monetary benefits an
employee gets from the organization. It includes everything from legally required public protection programs
such as Social Security to health insurance, retirement programs, paid leave, childcare or moving
expenses. While benefits come under indirect compensation and may consist of life, accident, health
insurance, the employer’s contribution to retirement, pay for a vacation, employer’s required payment for
employee welfare as social security. Rewards and recognitions, promotions, responsibility, etc., are some
factors that induce confidence in the employees and motivate them to perform better. It also instills the faith
in them that their good work is being recognized and they can boost their career opportunities if they
continue to work harder.
Pre-requisites for Effective Compensation Management
An effective compensation system should fulfill the following criteria:
1. Adequate: Minimum governmental, union, and managerial pay level positions must be met by the
compensation system.
2. Equitable: Care should be taken so that each employee is paid fairly, in line with his/her abilities,
efforts, education, training, experiences, competencies, and so on.
3. Balanced: Pay, benefits, and other rewards must provide a reasonable compensation package.
4. Secure: Employees security needs must be adequately covered by the compensation package.
5. Cost-Effective: Pay must be neither excessive nor inadequate, considering what the enterprise
can afford to pay.
6. Incentive Providing: The compensation package should be such that it generates motivation for
effective and productive work.
7. Acceptable to all Employees: All employees understand the pay system well and feel it is
reasonable for the enterprise and the individual.
B. INCENTIVES AND REWARDS
The term ‘incentive’ is used to describe material and non-material benefits given to employees in addition
to their normal salaries to induce them to go that extra mile towards promoting productivity and efficiency
of the enterprise. It is generally felt that the performance of personnel, either as individuals or as members
of a group, is below par when compared to their capabilities, skills and capacities. Incentive systems are
meant both to motivate an employee to earn more by working hard and also reinforce positive behavior on
his part by rewarding good performance for a healthier organizational climate. Hence the incentive is to be
understood both in the tangible and intangible senses, as aimed both at encouraging and sustaining better
performance from employees. Material incentives may take the form of wage payments related to
employees’ performance in addition to the normal salaries given for standard work assigned, welfare
related benefit programs, fringe benefits, rewards and recognition certificates.
Benefits of Incentives
1. Increased motivation: Incentives provide a clear reason for employees to strive towards specific
goals.
2. Enhanced focus: Time-bound incentives help employees prioritise their efforts towards meeting
deadlines.
3. Improved performance: Goal-oriented incentives can lead to higher productivity and better
performance outcomes.
4. Short-term urgency: Incentives create a sense of immediacy, driving employees to act promptly
and efficiently.
Rewards are something given to employees in recognition of their service, performance, effort,
achievement or behaviour. Rewards are the items and experiences that employees earn for meeting goals,
turning in exceptional work, being team players or any other recognition parameters that a manager puts
in place. Rewards are a way to acknowledge and celebrate employees’ hard work and dedication and are
given after something has been achieved.
Monetary rewards
• Digital or physical gift cards
• Pay and allowances
• Bonuses
• Commissions
• Merit pay
• Profit sharing plan
• Company stock options
Non-monetary rewards
• Plaques
• Time-off
• Professional development opportunities
Advantages of Rewards and Incentives in the Workplace
Increased productivity. Rewards and incentives help increase productivity in the workplace as every
employee works harder to meet their goal and secure a reward. Sometimes it's the reward that's largely
motivating, but most of the time, it's the recognition that comes with it that inspires an employee to push
themselves a little more.
Loyal Employees. It's important to employees that they feel their leadership team recognizes their work
and values what they do. Although employees can be happy receiving recognition without reward, a
motivating and thoughtful reward lets the employee know what they have made a difference for their team
and the organization. Staff members who feel appreciated and know their hard work is not in vain usually
become loyal to the company and even recommend open positions to their contacts.
A culture of friendly competition. You can develop incentive programs that are team-based or individual.
Either way, it's a way to introduce some friendly competition to the group. A strong team will love being able
to challenge each other while having the ability to receive rewards for their efforts. Competition is
motivating, and leaders may notice the hard work their team puts in to come out on top.
More accountability. With team-based rewards and incentives, where a whole team has to reach certain
goals or complete specific actions to get the reward, you can introduce a heightened sense of
accountability. Teammates hold each other accountable so they can succeed together, and individuals hold
themselves accountable, so they don't let their team down. Accountability in the workplace typically equates
to fewer errors, which is a major benefit for businesses.
Boosted morale. Getting recognized and receiving a reward or incentive that resonates with the staff
boosts morale. With the right culture in place, teammates should encourage each other to do well so they
can celebrate everyone's accomplishments. Employees feel the support of their coworkers and leaders,
which helps to boost team morale as everyone works toward the same goal of helping the business
succeed.
Increase employee motivation. When employees have something to work toward and know that in the
end, they'll receive a reward or incentive that they can enjoy, it's a huge motivator. Most people are
inherently competitive in that they want to stand out from their peers so leadership considers them for
promotions, raises and more responsibility, and it's the same when receiving rewards. Employees become
motivated to do well so they can experience the reward, but it also motivates them to make their leaders
and team proud.
Improved collaboration. If a leader creates rewards and incentives for the entire team as they work
together on a project or splits the group into multiple teams to tackle different facets of the task at hand,
teammates should improve their collaboration. Staff members are working toward a common goal where
each one has a responsibility to do their part to complete the project. It requires that they celebrate each
other's strengths, brainstorm together to figure out a problem and work through differences of opinion to
move forward.
C. EMPLOYEE BENEFITS AND SERVICES
Benefits and Services are called indirect compensation and are also known as fringe benefits and perks.
Perks (services) are something in addition to the payment like car fuel, free parking, clothing, and
educational supports. Whereas fringe benefits are something extra that is given by an employer to workers
in addition to their regular pay. Such benefits and services are used to persuade, motivate, and/or retain
employees and are linked with employees’ performance by stimulating them to greater efforts and higher
performance.
Employee benefits. In general, indirect and non-cash compensation paid by an employer to employees
in addition to their regular pay. Benefits tend be necessities for many people. Some benefits mandated by
law are SSS, Pag-IBIG, and PhilHealth. Other benefits vary from firm to firm or industry to industry.
Employee services. According to Employee Services Management Association, employee services is
defined as recreational programs, community services, recognition programs, event planning,
childcare/eldercare services, and travel offerings.
The main objective of benefit programs is to attract (recruit) and to retain employees including
1. To improve morale
2. To meet health and safety needs
3. To attract good and qualified applicants/employees
4. To reduce turnover
5. To maintain a competitive position
6. To enhance the organization’s image
Philippine Benefits and Services under the Philippine Labor Code
Employee Benefits
1. Minimum Wage. The Wage Rationalization Act (RA No. 6727) sets the minimum wage rates
applicable per region, province, and industry sector.
Minimum wage rate in Metro Manila (effective July 17, 2024).
Minimum wage rate in CALARZON Region (effective July 17, 2024).
2. Night Shift Differential. Additional compensation of at least 10 percent of an applicable wage rate
who perform work between 10 pm to 6 am.
3. Overtime Pay. An employee who renders work in excess of eight hours a day is entitled to overtime
pay equivalent to the applicable wage rate plus at least 25 percent.
4. Rest Days. Employees are entitled to a rest period not less than 24 hours of every six consecutive
working days (for example, Sunday). An employee who works during rest days is entitled to an
additional 30% of daily wage/compensation.
5. Holidays.
Unworked during regular holiday = regular daily wage
Work on regular holiday = 200% or double pay
Work on special holiday = regular pay + 30%
Rest day + work on special holiday = regular daily pay + 50%
6. Leaves
Maternity Leave
• 60 days leave for normal delivery, abortion, miscarriage
• 105-Day Expanded Maternity Leave Law (RA No. 11210); optional to a female
worker to extend additional 30 days with full pay
Paternity Leave
Solo Parent Leave
Leave due to Domestic Violence (VAWC Leave)
Leave due to Gynecological Disorders (Magna Carta for Women
7. 13th Month Pay (Presidential Decree No. 851). Regardless of nature of tenure of employment,
he/she will be paid not later than December 24 each year, equivalent to 1 month total basic salary.
8. Retirement Benefits (Section 1 of Presidential Decree No. 442)
9. Separation Pay. The basis for separation pay are redundancy, retrenchment, closure of business,
illness of an employee found suffering from
10. Disability Benefits
Temporary Total Disability – continuous benefit pays not exceeding to 129 days
Permanent Total Disability – guaranteed monthly benefit pays for 5 years
• Complete loss of eyesight
• Loss of two limbs at or above the ankle or wrist
• Permanent complete paralysis of two limbs
• Brain injury
• Additional permanent total disability:
11. Midyear Bonus (14th Month Pay). Equivalent to 1 month basis pay, given not earlier than May 15
of the current year
Employee Services
1. Flexible Work Schedules. This gives the employee some flexibility to maintain a balanced
personal life and continue to successfully complete their work responsibilities.
2. Wellness Programs. Employers offers programs to improve employee’s health. It can be offered
through reimbursable gym membership costs, on-site fitness facilities, and events promoting
healthy living and eating.
3. Product/Service Discounts. Some employers work with local and national retail products and
service providers to offer employee discounts for their personal needs.
REFERENCES
Rewards and Incentives Management. https://egyankosh.ac.in/bitstream/123456789/25734/1/Unit-8.pdf
Types of Compensation: Everything HR Professionals Need to Know. Shani Jay.
https://www.aihr.com/blog/types-of-compensation/
Compensation: Outline and Definitions. https://hr-guide.com/Compensation/Compensation_Overview.htm
Salary Grade Table for All Government Plantilla Positions (2024). Government PH.
https://governmentph.com/salary-grade-table-government-plantilla-positions/
Department of Budget and Management. https://www.dbm.gov.ph/wp-
content/uploads/Staffing/STAFFING2023/Table-II-Staffing-Summary.pdf
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%20Unit%20IV-Compensation%20Management.pdf
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