CHAPTER 7

WAGE AND SALARY ADMINISTRATION

The Role of Human Resources in the Payment of Salaries
One of the most important functions of the Human Resources is the payment of the proper salaries and wages to
all company employees. The pay that the employees receive from their employer is very reason for their being in the job.
The pay provides them with strong incentive to do their jobs ell and the rate of pay indicates their status in the company.
The pay determines the standard of living and their positions in the community that they live. It must be commensurate
with their extorts and contributions to the company’s’ profitability index. The determination of the proper level of pay is
the foundation effective employee and employer relationship as a satisfied worker will stay longer in the company and
develop a working team that could be beneficial to both parties. One way to retain competent employees and keep their
morale high is to plan salary levels so as to establish uniformity of pay in relation to the job in the company and those in
other business establishments in the community.
The function of the payroll in a company is usually the wage and salary administration and it is carried out by the
Human Resource Department. The most important duty of the Human Resource Department is to set wage scales high
enough to attract better employees and contribute to the level of profitability that will sustain continuous profitable
operations. The level of pay must not impair profits, however.
Theories of Wages
Wage theories deal with the payment of labor employed in competitive enterprises. Wages represent the payment of
one factor of production that is manpower. Profits and capital could not be attained without the manpower that has to be
paid according to their contribution for the acquisition of enough capital to attain the desired profits. Wages are the
contributions or are the shares paid for the value of land, capital and profits.
1. Classical Wage Theory
This theory is based upon the fundamental concept that labor is a commodity and we have to pay the price according to
supply and demand. When the labor supply is greater than the demand, the lower is the price and when there is greater
demand the higher is the price. The price of labor which is called wages, is necessary to keep the laborers to subsist and
perpetuate their race. Wages should not fall below subsistence level. When the supply of labor reaches below the
industrial requirement, there will be a competitive bidding among employers and therefore there will be a consequent rise
in wages. When the price of the labor is below the natural price, the condition of laborers is most wretched. When this
happens the laborers could be deprived of those comforts which customs render as absolute necessities.
2. The Just Wage Theory of St. Thomas Aquinas
A just wage is described as wage which permits the recipient worker to live in a manner in keeping with his position in
society. This doctrine is related to social organization based on the individual in the social organization. According to this
theory, the workers’ cost of living should be considered first in the cost of production. Wages are responsible for
allocating labor to various occupations. This theory is the basis in the implementation of minimum wage laws. While it
could not be consistent with the minimum requirements for a decent living in the social organization, it responds to the
basic requirements for subsistence living. The creation of the Tri-partite Board composed of Labor, Management and the
Department of Labor is the answer to the study of the implementation of just wages.
3. The Wage Fund Theory
The wage fund theory expounded by John Stuart Mill and his followers is based on the Malthusian theory of population
and the law of diminishing returns. This theory holds the idea that the working capital of the nation provides a fund from
which wages can be paid. The fund is to be divided by all the workers proportionately. When a certain group gets a
greater share of the total fund, the rest in the group will have less to share. An increase in the wages of some through
collective bargaining or any other pressures will adversely affect the wages of others. Under this theory it would appear
that it is futile to attempt to increase wages. It would appear that when you increase the wages of other workers in the
company, it would redound to decrease the wages of the other sectors, because the portion of the corporate wage fund
goes to the selected sectors in the organization. A comment under this theory is that the fund should be elastic for all the
other factors of production such as capital, maintenance, materials and labor. It should be elastic enough to meet the
economic conditions prevailing conditions prevailing at the time and the conditions of the corporate economy.
4. Bargaining Theory of John Davidson
The bargaining theory proposes that labor is a commodity like anything that could be bought at a price by the user. As a
commodity, it carries with it a price that is determined by the bargaining process between the buyer and seller. The sellers
of labor are the workers and the buyers are the users or the industries that utilize their services. The labor sets the limit of
the value of their services as conditioned by the utility of reward. Such reward is conditioned by what their money can
buy with the wages in the light of their actual standard of living, The bargaining theory brings about the organization of
labor unions. These unions bargain with management for their services. The management then sets the discounted value
of labor based on the value of output in question; while labor demands the living wages that they think is enough to
sustain a decent living condition. When management sets a rigid limit on the funds available for labor as it affects
operating cost and profitability; on the other hand, labor insists on living wages for their effort. The resultant condition is
either a strike or a lockout.
5. The Marginal Productivity Theory
The marginal productivity theory offers the best explanation of the wages in modern industry. The supply of labor in any
given economy on the depends upon the total number of individuals who want to work and available for work. Worker’s
mobility, which is the transfer from one company to another due to opportunities in the other company, affects the
structure of wages in the industry. It is not only the difference in wages that makes the employee transfer to another
Company. Better opportunities for advancement. More benefits, better working environment, or even the corporate
atmosphere are other factors that affect mobility, in this juncture, it may be surmised that mobility is not judged by the
amount of movement but the degree to which existing job differences call for worker movement. The hiring of added
labor force, or the transfer of one employee to another Company at a particular wage is based on the assumption of the
company that the added labor will contribute to the increase in production output or the increase in the quality of the
product. While such assumptions may have bearing to a certain extent, any increase in manpower tends to decrease the
value of the marginal product as the number of workers increases. In our developing economy where manpower is in
great supply against demand, competition in the labor market is seldom felt by the industry, except in some critical
positions where specialization is in great demand.
6. The Purchasing Power Theory
The purchasing power theory tries to establish the relationship between wages and the level of economic activity. The
level of economic growth is dependent upon the savings generated because the increase in wages creates a surplus that
propels growth. The more income the worker gets, the bigger the purchasing power of the workers; then this increases
consumption of goods and services. Increased consumption of goods generates employment opportunities.
7. Labor Theory of Value
Karl Marx propounds this theory of labor. This gives credence to the value of labor. It emphasizes that labor is the source
of all product and that without this important component, there could be no goods for human consumption. Every good
that is produced could be traced back to the participation of the worker and, therefore, labor must get the greater share of
the profit. This is the philosophy of some organized labor groups who are more active in the greater share of the profits of
the company operations. These labor unions have the notion that profits are the surpluses of the other factors of
production, and are pocketed by the capitalist businessman making them amass wealth Profits should be shared with labor
as they create the goods that generate these surplus incomes. Economic activity is created by capital, by the surplus profits
that create investments. When employers’ contentions run counter to the activists’ group of labor unions, this can create
labor unrest detrimental to both labor and management and even to economic growth.
8. The Standard of Living Theory of Wages
A recent development in labor market is the theory of living wages that means that wages should be based on the cost of
living. The cost of living is dependent upon the economic needs of the family for the basic necessities of life for food
clothing and shelter. While the philosophy is economically sound for the improvement of the living conditions of the
labor force, it is counterproductive due to the forces of global economic activity. Our productivity index has to cope with
increased competition in the global market and our products must be paired in quality and price. Any increase in
economic growth would redound to increased wages. Nevertheless, an increase in income would mean more
consumption. More consumption increases the prices of goods and thus living wages also need to be increased
proportionately. There could be no end to this argument. It is the government, labor and management that must sit
together to determine the level of living wages, if possible, by industry and by region.
PREPARED BY: DEDRIE C. OLFINDO
Wage and Salary Survey
Once a worth of a job has been established using one of the rating systems, the actual salary to be paid for each
job must be determined. A major factor in making the determination is the wage survey. Since salaries paid by other
companies have an effect on employment, morale and turnover rate, close attention is paid to the salary that is prevailing
in the community and industry for specific job.
A wage and salary survey are used to compile market pay data for plethora (large or excessive amount) of a job
on either a local or nationwide basis. This survey is usually performed in order to assess the effectiveness of a company’s
current pay structure and practices. Most companies participate in wage and salary surveys or they conduct their own
surveys.
Two types of survey:
Informal surveys - may be conducted through telephones and informal interviews.
Formal salary and wage surveys - are questioners based on benchmark jobs that are also present in other companies and
industries. In the formal survey method, the Human Resource Department (HRD) prepares a set of questionnaires
incorporating common jobs present in the company and is comparable with other jobs in other industries.
Importance of a Salary survey
A salary survey is a standard method of finding out what other organizations pay for specific positions or job categories.
It ensures that the company complies with the law and does not run the risk of fixing prices. The idea of using a salary
survey allows an employee to understand how much he/she should be earning as compare to what actually he is earning.
In similar way, it let employer know whether he is paying accurately to his employees.
Types of data collected in salary survey
Salary surveys collect quantifiable data such as:
 Base salary  Incentive/Bonuses
 Salary increases  Assignments
 Salary ranges  Work hours
 Starting salary
In addition, a salary survey may include non-quantifiable aspects such as:
 Educational requirements  Hiring sources
 Geographic location  Working condition
ADVANTAGES AD DISADVANTAGES OF SALARY SURVEY
 Advantages of a salary survey
 Comparative analysis with all the companies in the study and their specific sectors.
 Detailed knowledge of compensation in the market and its main components.
 Projection of salary increases based on current market practices.
 Exact homologation of each position compared to its equivalent in the market.
 Availability of updated and reliable information on wage behavior in the market.
 Strategic guidance to the Human Resources areas regarding the direction of global compensation of your
organization.
 Disadvantages
 Badge. One problem that all wage studies share is currency. Gathering information and detailed analyzes takes time,
especially if the survey contains substantial data. In an economy with up and downs, the information may be
irrelevant or outdated by the time the salary survey is released.
 The investigation process is complicated. To design a salary survey, it is necessary to have professionals, since the
approach and execution of the investigation is usually more complex than a census.
 Confidence margin of the data. There may be a statistical error due to not having surveyed the entire population.
Some examples of questions for a salary survey
 What is your annual salary not including bonuses?  Do you receive bonus?
 How often do you increase your salary?  Do you have life insurance?
 What level education does the position you work in inquire?  Is there any kind of incentive?
 What is your level of education?
 Do you have the option to advance to other positions?
 Do you know the salary policies that the company manages?
 Do you know the discount percentages that the company makes for health and pension services?
A key to effectively using this survey data is understanding the criteria used for data collection. When surveys clearly
specify how the data was collected and disseminated, we can be sure how to use this information as a reference for our
organization.
Procedure in Conducting Wage and Salary Surveys
Before embarking on a wage and salary survey, Human Resources Department should study the wage and salary data that
are already available. In any request for survey data, it could be recognized that job title alone is not good enough for
matching jobs. Each job title should accompany with one paragraph job description so that it is possible to accurately
compare jobs. In addition to the base salary, the information should include data on shift premiums, overtime payment
practices and methods of wage payment. Some surveys also include questions on paid holidays, vacation policies, pension
benefits, group health cards and life insurances and additional leave pays. These data needed for more analysis of the total
pay structure and its relation to other company benefits.
Defining the Labor Market

List of Key Job Positions

Detailed Description of Jobs

Collection of Salary Data

Compilation of salary Data

Results of Survey
The following are the steps in conducting the survey:
1.) Defining the Labor Market. Establishing the boundaries of the pertinent labor market is the most critical step in the
survey procedure. It involves the selection of the industry, the region or area or the firm to be included in the survey.
2.) List of key jobs and positions common to most firms in the survey. This will ensure a representative sampling of the
jobs that will be selected as a universal for a particular wage or salary survey.
3.) A detailed description of the key jobs and positions that are to be included in the survey and that is common to most
firms’ industries. Key jobs are labor grades that are comparatively stable in duties and responsibilities. These are
occupations that are common in most industries and scattered through the ladder of labor classification and commonly
familiar to most people in the industry.
4. ) Collection of accurate wage and salary data this may be done through a set of questionnaires and supplemented by
interviews to get the accurate information. The information must be able to pinpoint the problem area that has to be
addressed by the compensation level, compensation structure and the terms of payment plan.
5. ) A compilation of the wage and salary data for each job. The data gathered will provide management with
opportunity of arriving at the arithmetical average, the meridian and the range or rate paid and supplementary wage data.
6. ) Presentation of the results of the survey. The results are properly evaluated and HRD prepares the corresponding
recommendations to the management of the most appropriate action to take relative to the revision of the current wage
structure. Participating companies are also provided with the summary of findings to foster continuous cooperation.

After the organization completes the salary survey and finds out what he prevailing salaries are in the community
for comparable jobs, it must then make several decisions:

1. ) Whether the company should pay salaries above, below or at the same level, as the others in the same industry in the
community are paying for the same jobs.
2. ) Whether the company should pay a single rate for each job, or slot the job into ranges or grades which would provide
room for merit increases.
3. ) How many pay grades or salary ranges to use, and how wide each pay grade should be (from the minimum of the
grade to the maximum).
4. ) What is the range of the amount in the terms of money value that should be allotted for each salary grades levels?

Although there are no set rules for making this decisions, one tool that is often used to simplify the process is use
of two-dimensional graphs, also known as data trend graph. When the graph is used with the point system, the values of
the points for key jobs in the industry are plotted with the lowest pay at the bottom. The survey data for any jobs is then
plotted according to the evaluation points and grades. Eventually all the pay survey data should be plotted.

An examination of the graph will indicate the trend of the data plotted. A line is drawn to indicate this trend, using
one of the following techniques.

1) . Eye Inspection- the line is drawn freehand so that about the same number of data points fall above the line. It
follows the general trend of the data. This technique is the least scientific and reliable as this does not require scientific
computations. It is more of a judgmental analysis that is used only by experts in the field of evaluation.
2) . The Least Squares- This uses the statistical formula: the trend line will normally follow a straight path. It presents
more accurately the relationships between the peso or money value and the points for the key jobs.
3) . The Second-Degree Curve - Using another statistical formula; the trend line will normally take the form of a curve
and may more accurately indicate the trend of the data.
The trend line should correctly reflect the trend of the data collected so that competitive pay rates and ranges will
hold throughout the structure. If ranking method used, the rank number or grade can be substituted for points on the
horizontal graph.
A similar graph should then be drawn to reflect the relationship between internal existing rates and job rating
points. A trend line should be established and drawn. The trend line should be compared with the outside-survey trend
line. In this way management can see how salaries compare with those outside the company. Then the decision will have
to be made whether pay below the survey trend line, meet it or pay above it.
In deciding whether to match a survey trend line, management faces a conflict between personnel and economic
forces. If the company pays above the survey trend line, its ability to compete may be endangered as the labor cost will be
higher than the same industry, thereby added cost of production be added cost of production will be added to the cost of
the product. If the company pays below the trend line, its ability to hire capable employees may be affected or this will
cause personnel turnover. To reconcile these two conflicting forces, management may decide its own slope line that
should be about the same as the result of the survey.
 The Development of Wage and Salary Structure
The design and operation of wage and salary structure is the concern of management and employees. Wage and
salary structure is the hierarchy of jobs to where the pay grades according to the job evaluation results and its relations
with the pay system derived from the results of the salary survey. The jobs are ranked in ascending to descending order
according to their importance and based on the points or ranked earned in the job evaluation program conducted by HRD
and the committee created for the development of a more responsive pay system.
Advantages of the wage and salary structure:
6. It eliminates pay distortions and inequities in
1. It affects the workers’ earning and standard of living.
employee compensation.
2. It eases the recruitment and maintenance of an effective labor force.
7. It establishes an equitable salary range for various
3. It develops employee morale and increases work efficiency.
job.
4. It represents costs and competitive advantage in the industry.
5. It helps in preparing budgetary allocations and eases computation of salary adjustments and as an aid in short term and
long-range plans.
PREPARED BY: RACHELLE ALFUENTE
Wages Structure Design
The design of the wage and salary structure is the establishment of the job classes and rate ranges. All jobs within
a class are treated in the same way for purpose of economical administration. Pay structure ranges should be used in
developing a schedule for both rank-and-file employees, technical and managerial positions. In some companies, they
have a separate structure for hourly and daily paid employees and separate salary structure for regular monthly paid jobs.
The managerial pay systems are separated, based on rank depending on their assignments and contributions to the
company’s' profitability index.
The number of pay ranges in pay structure depends on the company and on the number such structures in the
company. If a company has a single salary structure, then, there should be many pay grades. If the organization has one
wage structure for hourly workers, another for office regular workers and still another for supervisors and managerial
employees, then there should be a moderate number of pay grades in each structure. There is no standard number of pay
grades per structure for any industry or company. This depends on the number of job classes and the number of
employees in the company. The greater the differences in job classes the greater the number of pay grades in the salary
structure to give credence to differences in duties, responsibilities and other factors of variances as determined by the job
evaluation program.
The same could be said for the width of the salary grade. There is no standard guide as to the spread of pay
grades. For hourly jobs, the spread from the minimum to maximum may vary from ten percent (10%) to twenty (20%),
while for salaried jobs, the spread may vary from 15% to 75%. The typical spread of salaried jobs is 3% from the
minimum to the next to step.
Once the pay structure has been determined, the next step is to assign employees to their proper job
classifications. If the jobs are properly evaluated and were developed before the implementation of any structure, most
existing salaries should fall within the salary range established for their jobs. When employees' salaries fall below the
minimum of the pay grade for the job, then it is called green circle rate. When that occurs, the decision to bring salaries to
the minimum of the grade should be based on the employees' performance. If the employees are on training stage, their
salaries should perhaps be below the minimum of the grade until they can fully meet the requirements then they are
brought up to at least the minimum of the pay grade.
SALARY RANGE
It is the range of the salary that is paid to an employee doing similar functions that has a minimum and maximum
pay and a series of step adjustments. It is to provide adjustment in pay for performance evaluation without distorting the
salary pay plan. It provides adjustments within the pay grade of about 3% between each step. It is Board and the
Department of Labor and Employment. An example is provided below:
Sample of Wage Plan for Small and Medium Enterprises
WAGE RATE FOR DAILY PAID EMPLOYEE
Pay Grade Hiring Rate First Step Second Step Third Step Fourth Step Fifth Step
1 375.00 386.00 397.00 409.00 421.00 433.00
2 421.00 433.00 459.00 472.00 500.00 530.00
3 500.00 530.00 533.00 550.00 566.00 583.00
4 566.00 583.00 600.00 618.00 636.00 655.00
5 636.00 655.00 675.00 695.00 715.00 736.00
THE NATIONAL GOVERNMENT WAGE PLAN
Fourth Tranche Monthly Salary Schedule for Civilian Personnel of the National Government Effective
June 1, 2012 (In Pesos)
Salary Grade Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Step 8
1 9,000 9,090 9,181 9,273 9,365 9,459 9,554 9,649
2 9,675 9,772 9,869 9,968 10,068 10,169 10,270 10,373
 3 10,401 10,505 10,610 10,716 10,823 10,931 11,040 11,151
4 11,181 11,292 11,405 11,519 11,635 11,751 11,869 11,987
5 12,019 12,139 12,261 12,383 12,507 12,632 12,759 12,886
Fourth Trachne Monthly Base Pay Schedule for Military and Uniformed Personnel Effective June 1,2012 (In Pesos)
Salary Adjustments with High Seniority
Another reverse situation is when the employee with high seniority, is either so competent or has received so
many increases that his salary is above the maximum of the pay grade. This is called red circle rate, which can be handled
in two ways:
1. Review the performance of the employee. If the employee is doing superior work and is capable of performing higher
tasks or responsibilities and has displayed potentials for promotion, then he has to be promoted and given the salary grade
corresponding to the new assignment. He should be under probation in the new assignment for at least 3 months before he
assigned to the new pay grade.
If the performance review reveals that the employee is not worthy to be promoted and such salary increase was
discreetly earned for some obvious reasons, then the employee will not get normal merit increase due to the
implementation of the new structure. As the range moves up due to cost-of-living index and the salary plan is revised
accordingly, then his salary probably will still fall within the range and then he could be entitled to future adjustments if
deemed necessary.
In order to remain competitive, a salary structure should be reviewed every two or three years depending on the
inflation rate prevailing in the country brought by economic factors or internal factors such as improved productivity and
profitability.
Prepared By: Sumagaysay, Rica joy
METHODS OF WAGE PAYMENT
The main purpose of a formal wage and salary management plan is to have a systematic method of payment to ensure that
employees receive a fair wage and salary for the work they perform. Up to this point we have examined how these wages
are determined or how much employees should be paid for the work they perform. Now we will examine the methods of
determining how salaries are paid.
Two organizations may have similar salary structures for their jobs, yet may use different methods in computing the
employees’ salaries. Salaries may be the same but one company may pay on hourly basis plus piecework.

There are two methods of Paying Salaries:

1. By the time worked-Earnings do not fluctuate with the amount of work performed or with quality of output. In this
method, wages are computed in terms of unit of time. It is common to pay workers by the day and the term day-work was
adopted. Day work methods of pay usually include weekly, or biweekly or monthly bases paying by the time work is
called non-incentive wage plan because the method of calculations will not immediately result in more money. No matter
how hard an employee works during an hour, the pay will be computed by the hourly rate and no more. Wages under
this plan are computed by multiplying the number of hours worked by the rate per hour as follows:

H x R =W in which
H= ours actually worked
R= rate per hours in pesos
W= total wages earned

Payment on the basis of time worked is more satisfactory under the following conditions:
Employees have little or no control over how much work they produce. There is no clear-cut relationship between the
effort made to produce the work and the amount of worked produced. Work delays occur often and are beyond the
employee’s control. Quality of work is very important. Units of work produced cannot be distinguished and cannot be
measured.

2. By the amount of work produced earnings depends on how much work the employee completes or on a related factor,
such as the quality of work. This method of playing wages is called an incentive wage plan. The most common of
incentive plan is called piecework. Piecework salaries are determined by the number of pieces produced or completed and
each piece is assigned a piece value that is called piece rate. Time study sets the acceptable number of pieces an employee
can produce at a given time taking into consider action the acceptable quality of work performance an industrial engineer
studies jobs and he is take to develop methods of performance reviving the flow of work changing materials and
equipment so that better work systems are developed. There are times that rates are based on past experiences on similar
jobs or on guesswork. The formula for computing salaries under piecework as follows:

N x U = W in which
N =number per units produced.
U =rate per unit in pesos
W = wages earned per day or per week.
Guaranteed piecework occurs when employees are paid their day-work when the work distortion is not caused by the
employee’s lack of power or some other factors beyond the control of the workers.
Payment by piecework is satisfactory under the following conditions:

1. When a unit of completed work can be measured easily. 2. When there's is a clear relationship between a worker’s
effort and the results of his efforts. 3. When the quality of work is less important than quality or when quality standards
are uniform and measurable. 4. When the flow of work is regular, breakdowns are few and jobs follow a standards
procedure with few interruptions.

WAGES AND SALARY POLICIES

The company or any organization must have a clear-cut wage and salary policy these policy guidelines will help
the organization have better relationships with employees and develop more comprehensive employee financial planning
program. The wage and salary must appeal to all employees and stimulate then to greater efforts.
The characteristics include the following:

1. The wage and salary plan must be easily understood. Every worker wants to know how his company wage plan
works. To keep employees in the dark as to how their earnings are determined could led to distrust on the
management and fear that they are not getting paid for what they have earned.
2. Salaries in the wage plan should be easily computed. Most employees like to compute from time to time what they are
earning and to make sure that the salaries one correct. Therefore, a wage payment plan should be simple enough to
allow quick calculations. The method of wage payment must be explained during the orientation program and
employees must be made understand that wages are related to employee’s effort and productivity and based on a
wage plan that related to duties and responsibilities of the positions and other factors considered in the job evaluation
program.
3. Salaries must be relevant with efforts. Standards should be set and can be reached by good workers. Standard should
be set so as to challenge a worker making him reach the extra effort, once he has achieved the standard, he should be
rewarded for his effort with increase earnings.
4. Incentive wage plans should provide payment for incentive earnings to employees soon after they have been earned
for effort exerted to reach the standards. In this way the reward or penalty is fixed in their minds in relation to the
work they dubiously it would be too costly and unwisely to prepare a payroll every day. A weekly payment of wages
is most reasonable.
5. The method of payment should be stable and unvarying frequent changes in wage payment plan may lead worker to
think that management is trying to confuse and or even cheat them. It is important to choose a plan that will fit the
needs of organization so that the necessity of frequent subsequent changes eliminated.
Prepared By: Narbonito, Rose Jane
Morale Renewal in the Workplace
1. Know that leaders have limitations.
Steve Berglas of the Harvard Medical School believes that "people who have achieved great heights but lack the bedrock
character to sustain them through the stress are headed for disaster." He predicts that one or more of the four could result
when the leader does not have the requisite character - arrogance, aloneness, adventure-seeking or adultery.
2. Choose character.
John C. Maxwell is right in his observation that, "We have no control over a lot of things in life. We don't get to choose
our parents. We don't select the location or circumstances of our birth and upbringing. We don't get to pick our talents and
IQ. But we do choose our character. In fact, we create it every time we make choices." In the workplace, you can create
your own character. Do you want easy money or work for it? Do you keep the right company? Do you stand by your
principles? You can, if you choose to.
3. Walk the talk.
Integrity is important in the workplace. In fact, many employers prefer to have employees with integrity first, then skills
second. Skills can be taught but integrity is innate in ones' character.
4. Avoid compromising.
While life is not black or white but shades of gray, there are instances when you have to choose between right or wrong.
A wrong can never be right even if a compromise is reached. If workers really want straight leaders, they must be vigilant
and uncompromising in asserting their rights as well as in performing their responsibilities. When compromises are made,
the rest of the organization, the buying public and the society are affected.
5. Use the same measures on yourself.
You want a leader who is not immoral, corrupt or incompetent. Exact the same measure or standards on yourself. Be as
harsh on yourself as you are in judging others. That you are just a follower is never an excuse for being lazy, incompetent
or immoral.
6. Face the mirror.
If you want one less scalawag in the workplace, reform yourself. Look for areas for improvement in your character. If you
have the guts, ask somebody you trust to tell you what is wrong in your character. Take the feedback positively as a gift
for your improvement. Don't rationalize but instead work at developing a better you.

6. Show the mirror to your leaders.

I you want honest and concerned leaders, you might just have to show them the mirror too. Some of them might have
blind spots and can't see their mistakes, shortcoming and transgressions. Remember that tyrants happen only temporal
the led blindly accept tyranny or do not do anything about it. To make leaders honest, they must know that they are
also being watched and evaluated and that positions and possessions are only temporal and ephemeral.
8. Don't just admit mistakes; correct them.
People who do not know that they are wrong cannot be corrected. The first step towards any form of renewal is
admission that there is a need for correction. Humility to admit mistakes is great but not enough. There must be
correction. Even the Bible mains stiff-necked after many rebukes will suddenly be destroyed-without remedy.
9. Have an improvement plan.
Do not leave matter of improving yourself. Moral renewal does not happen by accident. You must exert deliberate
effort to mend the crack in your character. Task yourself to show improvement. Have reasonable milestones that you
must monitor and check regularly, then celebrate your little victories. But do not boast about your achievement if
humility is a virtue you are trying to instill in yourself.
10. Rebuild and do not slide back.
Set your mind toward the future. Stop going back to your past, except to see how much you have progressed. Let your
guideposts be milestones in the future and not how you were before. If you have improved in a facet of your
character, make sure that you don't slide back. Be not like the dog that eats his own vomit. Never underestimate what
ordinary people can do, especially when they heed the call of one leader who was killed in Dallas, almost our decades
ago,"...ask not what your country can do for you; ask what you can do to your country."
7.

Other Information Related to Wages

Labor and Wages
The type of job one does and the financial compensation he or she receives are very important in our society. Job
type is linked to status as is wealth. While the type of job one performs is arguably more important status wise then
wealth, both are important to Americans. In the past we used to use other descriptions to classify workers. The terms blue
collar or white-collar employees were used to describe the type of vocation.
Blue Collar-Manual laborer
White Collar-Office workers
Pink Collar-Job associated with women like nursing, secretarial, etc. This, being a rather sexist term, is no longer used.
Today we classify our work roles into three categories called labor grades. These labor grades are described
below:
Skilled Labor- these are workers who have received specialized training to do their jobs. They have developed and honed
a special skill and may or may not need to be licensed or certified by the state. The examples of skilled laborers are:
carpenters, plumbers, electricians, business executives and managers, artisans, accountants, engineers, police, mechanics,
etc. These may be blue- or white-collar workers.
Unskilled Labor- These are workers who have received no specialized training and have few specific skills. As our
society has grown into an increasingly technological one, the members of this group have developed more and more
skills. A mechanic, for example, used to be considered unskilled labor. Today that is no longer the case. Mechanics
require a great deal of skill and training to work with today's modern engines. Examples of unskilled laborer are
construction workers, sanitation and custodial workers, painters, factory assembly line workers, etc. These are blue collar
workers.
Professionals- Arguably the elite of the labor grades, these are those workers who need an advanced degree to do their
jobs. The three primary groups of professionals are doctors, lawyers and teachers. These are white collar workers.
These labor grades are often said to be non-competing labor grades because workers rarely move from one grade
to another and do not compete salary wise with each other. There are reasons why they do not compete with each other.
The cost of education and training may be a significant obstacle. They might lack the opportunity to make such a move
and they might also have a lack of initiative.
Prepared By: Buizon, Lino
The Beginning of the Fringe Benefit Concept
The paternalistic concept of the fringe benefit started as welfare work by employers among their employees and
their families. The early process gained the employee’s loyalty to the company, cooperation and goodwill and inspired
them to work more efficiently. These concepts regarded the employee as dependent members of one big family and the
company kept them satisfied in their jobs. This was when the company was a small group that considered the employee as
a member of the family. Some companies then gave free meals to their workers, provided them with family quarters near
their work area and other services. Some big corporations then provided housing facilities, hospitals, recreational facilities
and other amenities for the employees' use.
For some time, this paternalistic concept worked well, especially when the company was small and the employees
were few. The management then, who were the owner themselves knew all their employees and their dependents. They
were considered as the "Big Brother", one who provided for family emergency needs and was highly respected by all.
As the firm expanded from the small family-owned business to a larger corporation, and the company workforce
increased tremendously due to the expansion of the business operation, the granting of fringe benefits became less and
less as corporate organization became aware of the expenditures for the granting of the usual benefits. On the other hand,
some employees who had not developed their loyalty to the organization considered these benefits as dole-outs, as special
concessions to low wages paid by the company. Those employees who continued to give their loyal service to the
company received their regular benefits. Those who were to the company were not given any. They considered the
granting of benefits as inequalities of treatment. There were then no clear-cut policies and guidelines in the granting of
company benefits and services.
The formation of the company unions resulted in the active quest for the fair treatment of all employees in the
granting of benefits and services. Due to this active movement of the unions, management became more prudent in the
treatment of benefits. The granting of benefits is now covered by specific company guidelines and procedures as
management realizes that employee services and benefits should be based on sound management principles of coexistence
with the employees' organization.
The Concept of Benefits
Benefits are anything that is not covered by regular salaries and wages. It is anything that contributes to the improvement
of the conditions of work, and that motivates the employees to do good work. Benefits are additional compensations that
guidelines the employees receive regularly at an interval stipulated in the company policies and guidelines.
Benefits are granted to employees to assist them and facilities are provided so that they will enjoy their stay in the
company. The main purpose is to develop greater commitment and loyalty and to keep good employees in the company
roster.
Management social conscience has shifted to recognize that employees are partners in their development and progress.
They realize that the employees are exposed to hazards of work and economic problems brought about by the rising cost
of living, the cost of hospitalization and other social life problems. Management is now more concerned with their
employees' welfare and share in the social responsibility and community activities. The government on one hand, has
recognized that the employee as contributor to the economic development of the country has to be taken care of by-
passing legislation that offers more benefits to the employees. The objectives of the company in granting fringe
benefits are:
1. To provide additional protection and comfort to their employees and their families as they consider them as members
of the team.
2. To maintain and develop employees as an effective work force duly committed to their corporate mission and vision.
3. To develop productive and happy employees and develop greater loyalty and commitment to motivate them to remain
in the employment of the company.
4. To develop greater partnership in the development of quality products and services to their customers and clients.
5. To develop satisfied employees and more concerned workers to avoid activism in the workplace that will interfere
with company production.
6. To develop partnership with labor unions and employees' associations.
The Governing Philosophy in Granting Fringe Benefits
Company benefits are additional costs in the company operations. They should be administered appropriately and be
based on a sound company philosophy in granting additional benefits. Such philosophy must consider the company's
ability to pay and contributions to the profitability of the organization. It must also be mutual benefit to the giver and the
receiver of benefits. Along these lines, the company benefits should focus along the following principles:
1. Company benefits should be based on the financial conditions and the capability of management to pay additional cost
of operations, as benefits granted cannot withdrawn when already granted. Benefits are humanitarian grants of
management and the capability to pay must be carefully studied. Additional cost may mean additional financial loses to
the company that may lead to company bankruptcy. Employees should not expect much at a time of financial crisis.
2. Benefits granted should not interfere with company operation and management has the prerogative to control the same.
As an example, additional leave credits cannot be availed of without proper management approval, especially if it will
interfere with production schedules. Shifting schedules are controlled by management to take care of continuous company
operation. Goods must be shipped to customers on time as delays may cause company problems. Additional leave credits
may be enjoyed during company shutdown or on scheduled maintenance break, or on an inventory period.
3. Benefits should be fair to all employees of equal rank and position, and should be capable of uniform implementation.
Example, if rank and file employees are entitled to a rice allowance of one sack per month, then all must be given the
same. If all senior managers are given car allowances, then all the others must enjoy the same benefits. Equal treatment
will avoid jealousy among managers thereby greater cooperation is maintained. Equal ranks must get the same benefits.
4. The benefits must have mutual value to both employers and the employees concerned. Example: Car plans are given by
companies to managerial employees to gain representation for the company and for them to go to the office in
convenience but it should not be abused by the employees concerned for coming late or going home early. Managers
usually enjoy flexible time schedules but they are not paid overtime work. On the other hand, additional leaves are
provided by management to give the employees a break from work and let them enjoy time off with their families, but
they are expected to be more refreshed; and when they go back to their work, they are expected to be more productive and
could work efficiently. Employees must understand that the company paid for their additional leaves without employees
work output but they must consider this as an investment in their personal welfare and benefits. There are companies that
provide additional sick leave credits for a specified number of days the employee can avail of this leave credits with pay
when they get sick or any immediate member of the family is in distress. Others still have sickness welfare funds that
employees can avail in case of sickness. Some companies provide health insurance programs that can be used in case of
confinement or medical consultations. With these programs, employees are relieved of worry in time of emergency and
are sure that they are not deducted their daily earnings and the company assumes the burden of paying medical bills that
are not covered by the usual government medical programs. Since employees are free from these personal stresses, they
feel more secure in their jobs hence greater efficiency is expected.
5. The employee must understand the costs benefit implementation and they should work hard so that the company will
maintain its ability to pay the added fringes. In time of financial crisis and the company is in the point of reversals, the
employee should not expect the company to be benevolent to implement some of those that are not usually given like
company outing and Christmas bonanzas. In Japan, when the company is in its reversal period, the employees themselves
opt to forego some benefits granted by management. That is the time that they work harder for the company to advance
further its recovery program and for them to enjoy later the suspended benefits. This partnership brings about healthier
management relations hence further company reversals are avoided.
Prepared by: Francisco, Faith
B.

In Japan, when the company is in its reversal period, the employees themselves opt to forego some benefits
granted by management. That is the time that they work harder for the company to advance further its recovery program
and for them to enjoy later the suspended benefits. This partnership brings about healthier management relations hence
further company reversals are avoided.
Our company unions and various organizations must understand that one cannot give what one does not have enough to
spare. Benevolence is hampered by ones' capacity to give.
6. Benefits must be measured in terms of employees' services to the company. While benefits should be uniformly
implemented, there must be a measurement in the policy guidelines on those who should receive the benefits in terms
of the following criteria:
a. Length of service - the following company guidelines may be of help in the granting of leave credits:
 Employees who have one year of service are entitled to the mandatory leave of five days per year.
 The employees enjoy an additional two-day leave for every year of service but not to exceed 15 days thereafter.
That is, if the employees serve the company for another five years then they can enjoy the maximum 15 days
leave credit per year.
 The employee may initially enjoy five days sick leave after one year of service, and then an additional leave of
one day per year of service until he enjoys the full fifteen days leave.
 Additional leave may be granted depending on the company's capability to pay
b. Retirement Benefits:
 Some companies pay retirement benefits outside of those given by the Social Security System. Usually employees
are paid 15 days for every year of service. Some companies pay an additional retirement benefit of one day after
five years of additional service. That is, when the employee has served for another ten years or total of 15 years,
he gets the full one month in separation pay.
 Other companies pay as much as two months in retirement benefits for every year of service. Others pay more
depending on their collective bargaining agreements.
 Other companies provide pension plans, either participatory or non- participatory. That is meant to relieve the
company of paying a huge amount of money when employees retire from employment.
c. Other Benefit Programs - company insurance plans covering the employees and their dependents may be given
depending on the services of the employees.
The granting of measurable benefits is a come-on perk for employees to stay longer with the company and
provide loyal and efficient services to satisfy customer demands and develop employee morale. Anticipation of greater
company benefits based on the number of years of service prevents employees from resigning and looking for other jobs
thereby lessening employees’ turnover rate.
7. Benefit programs should be a cooperative effort of top management and employees.
Recreational programs and athletic activities are fringe benefits of the company. Such programs should be
coordinated and participated in by all employees concerned and participation should be to the maximum. Planning the
program and assignment of the chairman and committee members should be handled by the Human Resources
Department Consultations with the different heads and those with the talent and expertise in all these activities should be
top priority for the success of the program. Department uniforms should be charged against department budget
allocations. The committee should decide the color of the uniforms, with less management intervention, to avoid
disgruntlement.
The athletic and recreational programs are company benefits. They aim to develop esprit de corps and boost
employee’s morale. When handled properly, this incentives and benefit program can boost efficiency and increase
production.
The Classification of Benefits f. Pag-ibig Fund- housing loans through employer-
Benefits could be classified under the following:\ employee contributions
g. Medicare Fund - for medical expenses of employees
1. Statutory Benefits are benefits mandated by law such as: and dependents
h. Social Security Benefits retirement, pension, death,
a. 13th month pay given half in June and half in December burial, disability, sickness, medical rehabilitation,
b. Five-day incentive leave employee compensation in case of accident in the
c. Birthday leave performance of work
d. Maternity leave with pay for married women i. Cost of living allowance
e. Paternity leave with pay when husband's wife gives birth
2. Company Benefits - These are benefits granted by the company outside of those mandated by law. These benefits
could be through a collective bargaining agreement and those that are given unilaterally by management.
a. Vacation leave with pay this varies from company to company
b. Sick Leave with pay k. Legal aid
c. Bereavement leave l. Car plan
d. Hospitalization plan m. Company Service and transportation
e. Sickness and accident insurance plan n. Stock option plan
f. life insurance and pension plans o. Management Bonus
g. Christmas and mid-year bonus p. Emergency leave
h. Housing equity assistance q. Personal leave
i. Educational plan r. Union leave
j. Recreational and fitness facilities s. Production sharing plan
t. Profit – sharing
Profit – Sharing Plans
Profit – sharing is an incentive plan under which an employer agrees to share with his personnel a specified
portion of the net profits of his business at the end of each fiscal period or over a given period. It is not a pension or a
bonus. It provides payment of current or deferred sums based on the profitability of the enterprise as a whole.
Purpose of Profit – Sharing
1. It is believed that employees would feel they have stake in the company if they get a direct share in the profits of
the enterprise in which they work.
2. It aims to modify employees’ attitudes to achieve greater employee efficiency, productivity and loyalty to the
firm and keener interest in its welfare.
3. Employers who subscribe to the concept of profit-sharing look upon their workers as partners or co-workers of
the enterprise.

Types of Plans
1. The Cash Plan – also known as the Current Distribution Plan. This provides for payment of the employee’s
share in the profit in cash based on his salary or wage. Shares under this agreement are generally paid quarterly,
semi-annually or annually.
2. The Deferred Distribution Plan – the program establishes a trust fund to provide employees with future
payment. The distribution of profits is withheld until the employee’s retirement, death or disability.
3. The Purchase Plan – under this plan, participating employees are permitted the purchase often through payroll
deductions, shares of company stock, either or less than the prevailing market price or at par value.
The scope and nature of benefits are so varied as enumerated above but such benefits can be further classified into four
(4) major categories:
1. Economical and financial benefits 3. Health and medical services
2. Recreational, social and athletic services 4. Professional services
The benefits derived from these company services are immeasurable, since they are intangible. Nevertheless, their value
cannot be underestimated as they contribute greatly in making the company a good place to spend the best years of the
employees’ productive life.
Prepared By: Fresnido, Eunice
Managing Benefits: Planning and Administration
Managing a fringe benefits program is an administrative and a financial problem to the employer. This needs to be
handled very carefully as this may mean sour relations between management and the employees. Careful planning of the
benefit programs could develop healthy administrative relations between the workers and management. It should be both
beneficial to the employer and the employee as well. It should be wisely managed by a competent staff that knows the
feeling of the employees and understand management benefits program philosophy.
Before any benefit program can be implemented, the management must look into the working conditions, hours of work,
salaries and wages. The basic necessities of the labor force must be met first before any benefit program is to be
implemented. Employees will only appreciate benefits if the basic requirements of wages and working conditions are met
by the management. Benefits must be operated with minimum financial expenditures as workers may see it as a ploy of
management in place of higher wages. Wages are still the basic intrinsic factors that drive the employees to be productive
and efficient in the performance of their task. Benefits are additional perks of management and their effects are only
appreciated at the time they enjoy the program, therefore they are considered as extrinsic motivators.
Strategic Benefit Implementation
Management has to analyze the benefit payoff of any benefits management program. Employees expect
management to provide them benefits but, on the other hand, job performance remains the same. Benevolent management
on the other hand expects employees to contribute to the companies’ productivity and profitability and the end game
should be of mutual benefits to both the employer and the employees. Since benefits are expenses and the results are not
usually immediately appreciated, a strategic management in its implementation must be considered.
1. Benefit Survey and Benchmarking - Benefits should be within the level of the industry in the community and, those
of the competitors in business as any added cost should affect product-pricing strategy. Cost information is necessary as
product competition affects company sales strategy and programs.
This could also be related to employees' turnover rate. When benefits are not properly benchmarked with the
same or similar firms, then the percentage of employee turnover may affect production. Some information may be
available from the Bureau of Statistics Office under the Department of Trade and Industry and the Department of Labor
and Employment. With information at hand, management needs to evaluate first the probable payoff of any benefit
program. This evaluation needs to focus and recognize that the employees have come to expect certain things from the
employers. The employees must feel that the employer is committed to their welfare, so that they will also be committed
to the objectives of the company.
There is much room in evaluating benefits decisions. Benefits are tax-exempt and tax deductible from their
operating profits. The company must find the right formula on what financial and non-financial incentives to give the
employees before any added benefits is to be implemented. Anything given by the right hand cannot be taken back by the
left hand.
2. Cost Control Strategy -In thinking about cost control strategy, several factors can be successful. It is assumed that the
larger the cost of benefits category, the greater the opportunity for savings. We must also consider the growth trajectory of
the benefit category as its cost impact may run out of control in the future. Cost containment effort can only work to the
extent that the employer has significant discretion and control in choosing how much they spend in the benefit category.
Statutory cost varies as government policies change over time and this is beyond control by management, and therefore a
tie-up study must be taken into course.
3. Staffing Cost Strategy - employers may change staffing practices to control benefit costs. Benefit costs are fixed and
spent per employee. The company may require the employees to work more hours and pay overtime premiums. The
overtime premium should be computed against expenses for employees' benefits. If the resultant factors are more than
savings without sacrificing production performance, then such plan could be implemented. This condition will also be
favorable to the employees as it will increase their home pay, which is more important especially for heads of the family.
The hiring of contractual or temporary employees will greatly reduce cost on benefits. Usually the regular
employees enjoy company benefits. The personnel roster should be studied very carefully; the workload must be properly
distributed and should maintain only the regular work force performing regular functions. This is the primary reason why
most companies resort to such personnel arrangements.
Job contractors may be employed on production activities that could be done outside the plant operations.
Outside of benefit cost reductions, other expenses could be avoided. While jobbers may gain profits for their operations,
the company on the other hand will be absorbed in the administration and payment of additional benefits. Nevertheless,
cost benefit analysis should also be considered along this line in terms of company productivity and quality index.
4. The Demographic Composition Cost Strategy
 The employer must also consider the demographic factors such as age, sex and status of their work force. The
benefits must be designed along the demographic need of the human resources to be more relevant and appreciated.
Younger workers would prefer higher wages and more overtime work to augment their take home pay to pay their needs
and other comforts. Married women will need more disability benefits and childcare protection than single women will.
Older work force will need more retirement programs and pension plans. Planning such a benefit program could be
ticklish issues as human resource compositions are varied in any company organization. Careful study must be conducted
along this line through a research program to assess employees' preferences; in the same way the consumers demand for
products and services are analyzed. Care must be taken not to raise employees' expectations regarding future changes
benefits.

5. Organization of Employees Cooperatives

Organizations of employee associations' cooperatives will greatly help unburden management of employees' loans
and cash advances. This will also help employees save part of their income and generate dividends as added incentives.
Credit unions are developed as self-help organizations to help solve some of their personal financial problems through
loans at very minimal interest plus incentive refunds.
Credit cooperatives can also have consumer merchandise and groceries for the employees' household needs at
prices below regular market cost and may be paid through payroll deductions. The organization of these associations
should be encouraged and supported by management. Some companies provide seed fund to start the program and make
monthly deductions based on the employees' approval on how much capital investment they will put into the association.
Capital investment plus interest can be withdrawn when the employee retires or is separated from the company.
6. Communicating Benefits to Employees
Any strategic implementation of any program cannot take root on employees' morale without their understanding
fully the concepts and program of management in the granting of such benevolent gestures for their welfare. Benefits are
investments in the greater job satisfaction and increased commitment for better performance on the job.
Research findings have shown that employees' job satisfaction and performance show very little correction
between company benefits programs. Many employees think that it is mandatory for a company to grant those 15 days
sick leave and 15 days’ vacation leave without their realizing that those are not mandatory for a company to implement.
Many employees do not feel the cost impact of such absence with pay to the company’s' financial conditions but his time
off from work is aimed giving the employees the time to relax and refresh and for them to be more efficient when they go
back to work.
The benefit program must be properly communicated to the employees during the orientation program and
induction of new employees. The cost implications must be mentioned in all activities through bulletins and company
news information. The employees must feel that they are part of the employers' welfare program as a member of one big
family.
Job applicants must be aware of the benefit programs of the company for them to be attracted not only on the
pay but also on how the company cares for their employees. A caring employer is what most productive applicants want
to work with.
Corporate Policy Guidelines on Benefits
The company must develop corporate policy guidelines in the implementation of any benefit program. Such policy
and procedure must be developed in cooperation with all operating and staff departments and submitted to the Board of
Directors for proper approval. It must set the policy and procedure in implementing the program and communicating these
to all employees concerned so that they are fully understood.
Corporate policy must follow the following guidelines:
1. It must specify are covered by the policy.
2. It must relate to the family and individual assistance to levels of need.
3. It must make the cost of work-related benefits as part of cost production.
4. It must provide security in such forms as compensation during work-related illness and retirement benefits.
5. It must promote healthy and safe work environment.
6. It must provide morale-building programs and develop employees' esprit de corps.
7. It must be of mutual benefit to both the employees and the employer.
Benefits Program Evaluation
Effective program management of employee benefits is an important means by which organizations successfully
compete. Benefit costs are substantial and continue to grow rapidly in some areas, especially on employees' health care
benefits. Effective evaluation of all benefit costs is necessary to be able to compete in products and services especially in
the global market. Evaluation must also focus its attention not only on product cost but also on the growing competition in
acquiring a totally committed work force that will profile the company toward its growth and economic stability. Beyond
investing more money and other resources on benefits implementation, the attraction and retention of quality employees
can be helped by proper evaluation and communication of benefit packages to all company stockholders. The employers
carry a very significant social responsibility to its employees in carrying out benefits decisions. On the other hand, the
employees must fully understand that they themselves carry the responsibility of safeguarding their own economic and
social well-being by protecting their employers through productive efforts to sustain financial stability.
A continuing research program should be done by the Human Resources Department to evaluate not only the cost
impact of benefit programs but also its effects on employees' performance and morale. Cost benefit researches and
evaluation are tools that will guide management in decisions on any further benefit implementation.
Prepared By: Lacanlale, Merry Faith