GROUP 7

REWARD MANAGEMENT OR COMPENSATION AND BENEFITS

REWARD MANAGEMENT- A plan to fairly and consistently compensate employees for

their value to the organization. It includes analyzing and controlling compensation,
benefits, and remuneration.
• - The process of providing incentives to employees for reaching or
exceeding organizational goals. Motivation for the meeting or exceeding of
organizational goals can be influenced through extrinsic rewards or intrinsic rewards.

TYPES OF REWARDS
1. Intrinsic Rewards – These are non-monetary rewards that provide
personal satisfaction, recognition, and a sense of accomplishment. An intrinsic reward is
a psychological reward that comes from within, such as a sense of pride
or accomplishment, that an individual receives for performing well or
achieving something.

Examples:

Recognition: Employee of the month awards, public acknowledgment for achievements.

Career Development: Opportunities for skill enhancement, promotions,
training programs.
Job Enrichment: Increased responsibility, autonomy in decision-making, and challenging
work.
Work-Life Balance: Flexible working hours, remote work opportunities, and wellness
programs.

2. Extrinsic Rewards – These are monetary or tangible rewards given to employees based
on their performance. Extrinsic rewards are external incentives that motivate people by
providing something tangible in exchange for completing a task or achieving a goal.

Examples Of Extrinsic:

Basic Salary: The regular pay an employee receives for performing their job.
Incentive-Based Pay: Bonuses, commissions, and profit-sharing.
Allowances: For transportation, meals, or housing.
Benefits: Health insurance, retirement plans, and government-mandated benefits (SSS,
PhilHealth, Pag-IBIG).

Monetary Rewards:

- Basic Salary: The fixed, regular compensation an employee receives.

- Performance-Based Pay: Compensation linked to individual or team performance (e.g.,
bonuses, sales commissions).
- Overtime Pay: Pay for working beyond the regular work hours
- Holiday Pay: Pay for working on official holidays.
- 13th Month Pay: A mandatory benefit in the Philippines equivalent to one
month’s salary paid annually.

OBJECTIVES OF REWARD MANAGEMENT

• · Attracting Talent: Competitive compensation and benefits help in attracting high-
quality candidates to the organization.
• · Retaining Employees: A well-structured reward system promotes
employee satisfaction and loyalty, reducing turnover.
• · Motivation and Performance: By linking compensation to performance, employees
are motivated to meet or exceed their goals.
• · Employee Engagement: When employees feel they are fairly rewarded, their level of
engagement and commitment to the company increases.
• · Compliance: Ensures adherence to national labor laws, ensuring fairness and equity
in pay practices.

BASIC SALARY STRUCTURE

OVERVIEW OF SALARY SYSTEM
The Philippine government sets minimum wage levels through regional wage boards.
These wages are adjusted periodically to reflect economic conditions and inflation. The
minimum wage varies depending on the region (e.g., National Capital Region, Region IV,
etc.).

SALARY GRADES AND RANGES

Companies often set salary bands based on job roles, industry, and the skill set
required. These grades are linked to job classification.

PAY PERIODS
Employees are typically paid monthly in large companies, though some industries
(e.g., retail or BPO) may use bi-weekly or semi-monthly pay periods.

COMPUTATION OF BASIC SALARY

Example: If an employee's monthly salary is ₱20,000, their basic daily wage can be
computed as:
Daily wage = 20000 ÷ 22 = P909.09
If they work overtime, this will be calculated at a rate of 1.25x the basic hourly wage.

BENEFITS AND ALLOWANCES

MANDATORY BENEFITS:
- Social Security System (SSS):Both employee and employer contribute to the SSS, which
provides benefits like sickness, maternity, disability, retirement, and death benefits.
- The contribution rates for SSS as of 2023 are 13% of the monthly salary, split equally
between the employee and employer (6.5% each). The maximum monthly salary base is
₱25,000, meaning the maximum monthly contribution for an employee is ₱1,625.

- PhilHealth:Employees are entitled to health insurance through PhilHealth, which

provides coverage for hospitalization, medical treatments, and surgeries.
- The contribution rate for PhilHealth is 4.5% of the monthly salary, with a ceiling of
₱80,000 for the monthly salary. The contributions are shared between the employer and
the employee (2.25% each).

- Pag-IBIG Fund:This provides employees with savings programs and access to housing
loans. The contribution rate is 2% of the monthly salary, with a ceiling of ₱5,000. The
employer also contributes an additional 2%.

- 13th Month Pay:By law, all employees are entitled to a 13th-month pay equivalent to
one-twelfth of their total basic salary earned in a year. For example, if an employee
earns ₱240,000 annually, their 13th-month pay will be ₱20,000.

VOLUNTARY BENEFITS:
— Private Health Insurance: Many companies offer supplemental health insurance,
which covers additional medical costs not included in PhilHealth, such as out-patient
care or elective procedures.
— Retirement Plans: In addition to SSS, employers may offer private retirement plans or
pension schemes.
— Bonuses and Incentives:Many companies offer performance bonuses, Christmas
bonuses, and other forms of incentives to encourage high productivity.
— Leave Benefits:Employees are entitled to 5 days of sick leave and 5 days of vacation
leave annually, which are convertible to cash if unused, based on company policy
— Other Allowances:Many companies provide allowances for transportation (e.g.,
₱1,000 per month), meal allowances (₱1,500 per month), and hazard pay for employees
working in dangerous environments.

HOLIDAY PAY AND WORKING ON REST DAYS

PUBLIC HOLIDAYS:
- Regular Holidays in the Philippines include New Year's Day (January 1), Independence
Day (June 12), and Christmas Day (December 25). On these holidays, employees who do
not work are entitled to 100% of their daily wage.
- Special (Non-Working) Days: Examples include Ninoy Aquino Day (August 21) and
EDSA People Power Revolution Anniversary (February 25). Employees who work on
special days are entitled to 130% of their regular pay.
HOLIDAY PAY COMPUTATION:
- If an employee earns ₱900 per day and works on a regular holiday, they are entitled to
200% of their daily wage.
Example: ₱900 x 200% = ₱1,800 for working on a holiday.
WORKING ON A REST DAY:
- If an employee works on their scheduled rest day, they are entitled to 130% of their
daily wage.
Example: If the basic daily salary is ₱900, working on a rest day would yield:
P900 x 1.3 = P1170
OVERTIME PAY:
- Overtime pay is calculated at 1.25 times the basic hourly rate for hours worked beyond
the regular 8- hour workday, and 1.5 times for work beyond 8 hours on a holiday.

LEGAL COMPLIANCE AND LABOR STANDARDS LABOR CODE OF THE PHILIPPINES

The Labor Code of the Philippines outlines the employer's obligations regarding
employee compensation, including minimum wage laws, benefits, and holiday pay. The
Code mandates that all workers must receive at least the minimum wage for their work,
and all mandatory benefits (SSS, PhilHealth, Pag-IBIG) must be provided.

EMPLOYMENT CONTRACTS:
- Employment contracts must clearly define compensation, benefits, working hours, and
policies related to holidays and rest days.
PENALTIES FOR NONCOMPLIANCE:
- Employers found violating compensation laws may face fines, penalties, or legal action.
Nonpayment of holiday pay or failure to comply with SSS, PhilHealth, or Pag-IBIG
contributions can lead to significant penalties.

THE IMPACT OF COMPENSATION AND BENEFITS ON EMPLOYEE MOTIVATION

Effective compensation and benefits plays an important role in attracting top talent,
retaining valuable employees, and ensuring high levels of job satisfaction and
engagement. Competitive compensation packages not only improve organizational
performance but also create a motivated, loyal workforce.

KEY MOTIVATION THEORIES

A. MASLOW’S HIERARCHY OF NEEDS
- Maslow proposed that human beings have five levels of needs, arranged in a hierarchy:
physiological, safety, social, esteem, and selfactualization. According to Maslow,
individuals must satisfy lower-level needs before they can focus on higher-level needs.
MEETING BASIC NEEDS (MASLOW)
- A competitive salary ensures employees can meet their physiological and safety needs.
Benefits like health insurance and retirement plans provide financial security and reduce
stress, allowing employees to focus on higher-order motivations.

B. HERZBERG’S TWO-FACTOR THEORY

- Herzberg distinguishes between hygiene factors (which prevent dissatisfaction) and
motivators (which promote satisfaction and higher motivation).
PREVENTING DISSATISFACTION AND ENHANCING SATISFACTION (HERZBERG)
- Proper compensation (salary) addresses hygiene factors, preventing dissatisfaction,
while benefits such as recognition programs and opportunities for growth fulfill
motivators, leading to higher job satisfaction.

C. VROOM’S EXPECTANCY THEORY

- Vroom's theory posits that motivation is based on three factors: Expectancy (the belief
that effort will lead to performance), Instrumentality (the belief that performance will
lead to rewards), and Valence (the value placed on the reward).
THE EXPECTANCY-REWARD LINK (VROOM)
- Performance-based pay, like bonuses and commissions, aligns employee performance
with rewards. Employees who see that hard work leads to tangible rewards are more
motivated meet their targets

D. EQUITY THEORY
- This theory emphasizes fairness and balance. Employees compare their inputs (effort,
time, skills) and outputs (salary, benefits) with others in similar roles. If they perceive an
imbalance, it can lead to dissatisfaction.
FAIRNESS AND EQUITY IN PAY (EQUITY THEORY)
- Employees are motivated when they feel their pay and benefits are fair. Organizations
that ensure equity in pay structures and reward systems minimize feelings of resentment
or unfairness, boosting morale and performance.

E. LOCKE’S GOAL SETTING THEORY

- Locke’s theory suggests that goal setting is one of the most effective ways to motivate
employees.Clear, specific, and challenging goals improve performance and increase
motivation.
GOAL-ORIENTED MOTIVATION (LOCKE)
- Compensation packages tied to specific and measurable goals increase motivation by
providing employees with a clear roadmap for success. For example, sales incentives tied
to revenue targets or bonuses tied to project completions motivate employees to strive
for high performance.

F. SELF-DETERMINATION THEORY
- This theory focuses on intrinsic motivation, where individuals are motivated by a desire
for personal growth, autonomy, and competence.
INTRINSIC MOTIVATION AND AUTONOMY (SELF-DETERMINATION THEORY)
- Non-financial benefits that allow for greater work autonomy (e.g., flexible hours or
remote work options) support intrinsic motivation. Employees who feel they have
control over their work environment are more likely to remain engaged and productive.