THE FUNCTIONS AND IMPORTANCE OF
COMPENSATION, WAGES AND PERFORMANCE
EVALUATION, APPRAISAL, REWARD SYSTEM,
EMPLOYEE RELATIONS AND MOVEMENT
Ice Breaker
Jumbled letter
1. CASONMOPIETN -
all forms of pay given by
employers to their
employees for the
performance of their jobs
Compensation
2. ERFOPRMCAEN
VTIELNUAOA - a process
undertaken by the
organization, usually done
once a year, designed to
measure
Performance Evaluation
3. MEPLYEOE ERLTIAOSN - the
connection created among
employees/workers as they do
their assigned tasks for the
Employee Relation
4. PELMOEYE EOVMEMTSN -
series of actions initiated by
employee
Employee Movements
5. NUIMNIOS – the
principle of combination
for unity of purpose and
action
unionism
COMPENSATION/WAGES AND PERFORMANCE EVALUATION
Employee compensation and performance evaluations
are linked, as performance directly impacts the
compensation received. Other factors taken into
account include job worth, organizational compensation
strategy, labor market conditions, cost of living, and
area wage rates. Compensation can take various forms,
including direct, indirect, and nonfinancial.
TYPES OF COMPENSATION
DIRECT COMPENSATION
Includes workers’ salaries,
incentive pays, bonuses, and
commission.
INDIRECT COMPENSATION
includes benefits given by employers
other than financial remunerations; for
example travel, educational and health
benefits,
and others.
NONFINANCIAL COMPENSATION
includes recognition programs, being
assigned to do rewarding jobs, or
enjoying management support, ideal
work
environment, and convenient work
hours.
CONNECTING
COMPENSATION TO
ORGANIZATIONAL
OBJECTIVE
In the 21st century, worker compensation has
shifted significantly due to market competition,
required skills, and technology changes.
Organizations now base pay on competencies
and contributions to company success rather
than job titles. Wage experts design
compensation packages to benefit both the
company and its employees.
COMPENSATION
Compensation is a motivation for employees,
rewarding good performance and contributing
to company [Link] this, the following
must be considered
PAY EQUITY
The Equity Theory is a motivation theory that examines how
employees react to the fairness of their pay compared to their
efforts. It suggests that employees feel motivated when they
believe their pay matches the value of their job performance.
Pay equity occurs when employees receive fair compensation
for their work, leading to improved job performance and
increased motivation.
EXPECTANCY THEORY
another theory of motivation which predicts that
employees are motivated to work well because of
the attractiveness of the
rewards or benefits that they may receive from a job
assignment. The employee’s perception of the
compensation or pay attached to a job position is an
important factor in ascertaining the motivational
value of compensation.
BASES FOR COMPENSATION
PIECEWORK BASIS
when pay is computed
according to the
number of units
produced
HOURLY BASIS
when pay is computed
according to the
number of work hours
rendered
DAILY BASIS
when pay is computed
according to the
number of workdays
rendered
MONTHLY BASIS
when pay is computed
according to the
number of work months
rendered
Compensation rates are influenced by
internal and external factors. Among the
internal factors are the organization’s
compensation policies, the importance of
the job, the employees’ qualifications in
meeting the job
requirements, and the employer’s financial
stability.
External factors, on the other hand,
include local and global market
conditions, labor supply, area/regional
wage rates, cost of living, collective
bargaining agreements, and national
and international laws, among others.
PURPOSES OF PERFORMANCE
EVALUATION: ADMINISTRATIVE
AND DEVELOPMENTAL
Improving individual job performance through performance
evaluation is just one of the reasons why employees are
subjected to assessments on a
continuous basis. There are other purposes behind employee
assessment that are beneficial to the company and employee.
ADMINISTRATIVE PURPOSES
These are fulfilled through appraisal/evaluation
programs that provide information that may be
used as a basis for
compensation decisions, promotions, transfers,
and terminations. Human resource planning may
also make use of it for the recruitment and
selection of potential employees.
DEVELOPMENTAL PURPOSES
Appraisal/evaluation programs inform employees
of their performance, strengths, weaknesses, and
training needs. Workers are more receptive to
management's explanations on the importance of
regular evaluations for improving competencies
and preparing for future job assignments.
Different performance appraisal
methods are used depending on
the information an evaluator aim
to find out.
Performance Appraisal Methods
Methods of evaluating workers have
undergone development to adapt to new
legal employment requirements and
technical changes.
Some appraisal methods used today are the
following:
1. TRAIT METHODS
performance evaluation method
designed to find out if the
employee possesses important
work characteristics such as
consciousness, creativity,
emotional stability, and others
2. GRAPHIC RATING SCALES
performance appraisal method
where each characteristic to be
evaluated is represented by a
scale on which the evaluator or
rater indicates the degree to which
an employee possesses that
characteristic.
3. FORCED-CHOICE METHOD
performance evaluation that
requires the rater to choose from
two statements purposely
designed to distinguish between
positive or negative performance;
for example: works seriously –
works fast; shows leadership – has
4. BEHAVIORALLY ANCHORED RATING
SCALE (BARS)
a behavioral approach to
performance appraisal that
includes five to ten vertical scales,
one for each important strategy
for doing the job and numbered
according to its importance
5. BEHAVIOR OBSERVATION
SCALE (BOS)
a behavioral approach to
performance appraisal that
measures the frequency of
observed behavior
ADVANTAGES OF PERFORMANCE
APPRAISAL
It is said that performance
appraisal is an investment for
the company which can be
justified by the following
advantages: (Enriquez, 2016)
➢ PROMOTION
Performance Appraisal helps the
supervisors to chalk out the
promotion programs for efficient
employees. In this regard,
inefficient workers can be dismissed
or demoted in case.
➢ COMPENSATION
Performance Appraisal helps in chalking out
compensation packages for employees. Merit
rating is possible through performance
appraisal. Performance appraisal tries to give
worth to performance. Compensation
packages which include bonuses, high salary
rates, extra benefits, allowances, and
prerequisites are dependent on performance
appraisal. The criteria should be merit rather
than seniority.
➢ EMPLOYEES DEVELOPMENT
The systematic procedure of performance
appraisal helps the supervisors to frame
training policies and programs. It
contributes to analyzing the strengths
and weaknesses of employees so that
new jobs can be designed for efficient
employees. It also helps in framing future
development programs.
➢ SELECTION VALIDATION
Performance Appraisal helps the
supervisors to understand the validity
and importance of the selection
procedure. The supervisors come to know
the validity and thereby the strengths
and weaknesses of the selection
procedure. Future changes in selection
methods can be made in this regard.
➢ MOTIVATION
Performance Appraisal serves as a
motivation tool. Through evaluating the
performance of employees, a person’s
efficiency can be determined if the
targets are achieved. This very well
motivates a person for a better job and
helps him to improve his performance in
the future.
WHY SOME EVALUATION PROGRAMS
FAIL?
Performance appraisals (such as
manager/supervisor appraisal,
selfappraisal, subordinate appraisal,
customer appraisal, peer appraisal, team
appraisal, or 360-degree appraisal) may
sometimes fail due to various reasons
including the following:
• the inadequate orientation of the evaluatees
regarding the objectives of the program;
• incomplete information of the evaluatees
(e.g. proper answering of the evaluation
questionnaire);
• bias exhibited by evaluators;
• inadequate time for answering the
evaluation forms;
• ambiguous terms used in the evaluation
questionnaire;
• employee’s job description is not
properly evaluated by the evaluation
questionnaire used;
• inflated ratings resulting from the
evaluator’s avoidance of giving low
scores;
• evaluator’s appraisal is focused on the
personality of the evaluatee and not his or
her performance;
• the unhealthy personality of the
evaluator; and
• the evaluator may be influenced by
organizational politics.
REWARD
SYSTEM
Organizations offer competitive rewards
systems to attract knowledgeable and
skilled people and to keep them
motivated and satisfied
once they are employed in their firm.
Further, rewards promote personal
growth and development and present
fast employee turnover. Management
offers different types of rewards:
MONETARY
REWARDS
rewards that pertain to
money, finance, or
currency.
A. PAY/SALARY
financial remuneration given in exchange for
work
performance that will help the organization
attain its goals; examples: weekly, monthly,
or hourly pay, piecework compensation, etc.
B. BENEFITS
indirect forms of compensation given to
employees/workers to improve the quality of
their work and personal lives; health care
benefits, retirement benefits, educational
benefits, and others are examples of these
C. INCENTIVES
rewards that are based upon pay-for-
performance philosophy; it establishes a
baseline performance level that
employees or groups of employees must
reach to be given such
reward or payment; examples; bonuses,
merit pay, sales incentives, etc.
D. EXECUTIVE PAY
a compensation package for
executives of organizations which
consists of
five components: basic salary,
bonuses, stock plans, benefits, and
perquisites
E. STOCK OPTIONS
are plans that grant employees the
right to buy a specific number of
shares of the organization’s stocks at
a guaranteed price during a selected
period.
➢ A research on effective
rewards systems by the
Center for Effective
Organizations revealed
that rewards systems can
influence six factors or
areas that impact
organization effectiveness.
These are:
• attention and
knowledge;
• motivation of
performance;
• skills and
knowledge;
• culture;
• reinforce and define
structure; and cost.
Nonmonetary Rewards
rewards that do not pertain to money,
finance, or currency; refer to intrinsic
rewards that are self-granted and which
have a positive psychological effect on
the employee
who receives them.
a. Award
a nonmonetary reward that may be given
to individual employees or groups/teams
for meritorious service or outstanding
performance; trophies, medals, or
certificates of recognition may
be given instead of cash or extrinsic
rewards.
b. Praise
a form of nonmonetary, intrinsic reward
given by superiors to their subordinates
when they express oral or verbal
appreciation
for excellent job performance
EMPLOYEE RELATIONS
Effective managers must foster good employee relationships
among all human resources in organizations. Employees are
social beings requiring connections for social support to carry
out tasks. Interaction with co-workers, especially friends, or
collaborating on tasks can alleviate stress, fear, and
loneliness. Overcoming negative feelings allows employees to
work more effectively towards organizational goals. Employee
relationships are crucial for successful work activities and
overall organizational achievement.
ffective Employer Relations and Social Suppo
Social support is the sum of perceived assistance or benefits
that may result from effective social employee relationships.
The quantity and quality of an employee’s relationship with
others determine social support (esteem support,
informational support, or financial support). In short, social
support and effective employee relations must always go
together “a horse and a carriage,” where one would be
useless without the other. Therefore, without social support,
effective employee relations are not possible; and without
effective social employee relationships, social support,
ffective Employer Relations and Social Suppo
Below are some barriers to good employee relations:
• Anti-social personality: refusal to share more about
oneself to coemployees; being a loner
• Lack of trust in others
• Selfish attitude; too many self-serving motives
• Lack of good self-esteem
• Not a team player
• Being conceited
ffective Employer Relations and Social Suppo
• Cultural/subcultural differences
• Lack of cooperation
• Communication problems: refusal to
listen to what others seek to
communicate
• Lack of concern for others’ welfare
Here are some ways to
overcome barriers to good
employee relations:
• Develop a healthy personality to
overcome negative attitudes and
behavior.
• Find time to socialize with coworkers.
• Overcome tendencies of being too
dependent on electronic gadgets.
• Develop good communication
skills and be open to others’
opinions.
• Minimize cultural/subcultural
tension.
The Benefits of Strong Employment
Relations
Having a strong employer and employee
relations reaps a lot of benefits
for your business. The most advantages
are listed below: (Enriquez, 2016)
[Link]
Strong employment relations create a pleasant
atmosphere within the work environment; it
increases employee motivation and can also be
increased through improved employee morale.
Companies that have invested in employee
relations programs have experienced an increase in
productivity, and therefore, the increased
productivity leads to increases in profits for the
business.
[Link] Loyalty
Creating a productive and pleasant work environment has a drastic
effect on an employee’s commitment to the firm, it encourages a
loyal workforce. Having such a labor force improves employee
retention, in doing so the cost of recruitment, hiring, and training
are cut drastically. For most businesses, the high cost of employee
turnover outweighs the cost of the employee relations program that
they have in place. Another benefit is that when the employee
turnover is low, it ensures that the employer has a trained and
skilled set of employees.
[Link] Reduction
When a work environment is efficient and friendly, the extent of
conflict within the workplace is reduced. Fewer conflict results in the
employees being to concentrate on the tasks at hand and they are
therefore more productive. All the research and statistics lead to one
conclusion, ‘A happy workforce is a productive workforce.’ Creating
a sound and efficient work environment with excellent management
and a strong employer-employee relation can be the vital key to any
business success or failure.
Three Types of Employees
Engaged
• employees who work with passion
and feel a deep
connection with their company
• they drive innovation and move
the organization
forward
Not Engaged
• employees who are essentially
“checked out”
• they put time, but not energy or
passion, into their work
Actively Disengaged
• employees who are not only
unhappy at work but also act
out their unhappiness
• they undermine what their
engaged coworkers
accomplish
EMPLOYEE MOVEMENTS
A labor union is a formal union of
employees/workers that deals with employers,
representing workers in their pursuit of justice and
fairness and in their fight for their collective or
common interests. Employees or workers unionize
because of financial needs, unfair management
practices, or social and leadership concerns.
a. Financial needs
complaints regarding wages or
salaries and benefits given to them
by the management are the usual
reasons
why employees join labor unions.
b. Unfair management practices
perceptions of employees regarding unfair
or biased managerial actions are also the
reason why they join mass movements;
examples of lack of fairness in management
are favoritism related to promotion and
giving of training opportunities and
exemption from disciplinary action.
. Social and leadership concerns
some join unions for the satisfaction of
their needs for affiliation with a group
and for the prestige associated with
coworkers’ recognition of one’s
leadership qualities.
Steps in Union Organizing
Terry Moser, an expert union
organizer was credited by Snell
and Bohlander (2011) for the
following union-organizing steps:
Step 1. Employee/Union Contact
to explore unionization possibilities, employees weigh
the advantages and disadvantages of seeking labor
representation while the union officers gather more data
about the employee’s complaints, as well as data about
the employer’s management styles, financial stability,
policies, etc. these actions by employees and union
officers are necessary to build a case against the
employer and defense for
the employees’ decision to unionize.
Step 2. Initial organizational
This is conductedmeeting
to attract more supporters
and select potential leaders among the
employees who can help the union
organizers. Information or data obtained in
Step 1 will be used by the organizers to meet
the employees’ need to explain the means to
accomplish their goals.
Step 3. Formation of the in-house
organizing committee
this starts with the identification of employees who are ready to
act as leaders in campaigning for their goals, in trying to get
the interests of the other employees to join their movement,
and in convincing employees to sign an authorization card to
show their willingness to be represented by a labor union in
collective bargaining with their employer. The strength of the
union is shown by the number of employees who signed the
authorization card. At least 30 employees must sign the said
card before the National Labor Relations Commission (NLRC)
approves the holding representation election.
Step 4. If a sufficient number of employees
support the union movement, the
organizer requests for a representation
election or certification election
a representation petition is filed with the NLRC asking for the
holding of a secret ballot election to determine the employees’
desire for unionization. Before the election, leaders’ campaign
for employees’ support for the election and encourage them to
cast their votes. Intense emotions are shown by employees, the
labor group, and the employers during this period.
Step 5. End of union organizing
when a sufficient number of votes is garnered,
the NLRC certifies the union as the legal
bargaining representative of the employees.
Contract negotiation or collective bargaining
agreement (CBA) negotiations follow the
certification. The CBA process involves the
following procedures:
a. Prepare for negotiations
Both the union and the employer's groups gather and
organize data to support their bargaining proposals.
Each side selects four to six representatives for their
bargaining teams, with the union president serving as
chief negotiator and the organization's vice president
of labor relations as chief negotiator for management.
Economic and internal organization data are crucial for
negotiations.
b. Develop strategies
management proposals
are developed and limits of concessions are
determined, while also considering the union’s
goals and their possible strike plans. The union,
on the other hand, tried to develop better
strategies to convince the management group to
accept its proposals.
c. Conduct Negotiations
Negotiations involve bargaining, analyzing proposals,
and resolving issues within the bargaining zone.
Deadlocks may lead to strikes, picketing, or boycotting
by the union, while management may choose to
continue or shut down operations, or participate in a
lockout. Mediation and arbitration are methods used to
resolve deadlocks, with neutral third parties facilitating
compromise or issuing final decisions in labor disputes.
d. Formalize agreement
After negotiations, the union and management formalize a binding agreement listing
terms and conditions, requiring clear language and ratification by a majority of
employees. Once ratified, the document is signed by all bargaining team members and
organization leaders before dissemination. Continuous CBA activities involve preparing
for the next negotiation immediately after formalizing the agreement. The grievance
procedure allows the union to represent members by addressing complaints with the
mmediate supervisor and union steward. If unresolved, the grievance progresses to the
department manager and chief steward, then the vice president for labor relations and
local union president. If still not resolved, the complaint may go to NLRC arbitration
where a neutral third party issues a final decision. Ultimately, both parties must adhere
to the arbitrator's ruling. This process allows for timely resolution of grievances and
encourages continuous improvement in negotiations. Overall, clear communication,
formal procedures, and neutral arbitration play key roles in maintaining positive labor
relations and resolving disputes effectively.
The End
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