THE FUNCTIONS AND

IMPORTANCE OF
COMPENSATION, WAGES AND
PERFORMANCE EVALUATION,
APPRAISAL, REWARD SYSTEM,
EMPLOYEE RELATION AND
MOVEMENT FOR
ORGANIZATION AND
MANAGEMENT
COMPENSATION/WAGES and
PERFORMANCE EVALUATION
Compensation/wages and performance
evaluation are related to each other because
the employees’ excellent or poor performance
also determines the compensation given to
them, after considering other internal and
external factors like the actual worth of the job,
compensation strategy of the organization,
conditions of the labor market, cost of living,
and area wage rates, among others.
 TYPES OF
COMPENSATION
Direct
Compensation
Indirect
Compensation
Nonfinancial
Compensation
 Direct Compensation
Includes workers’ salaries, incentive
pays, bonuses, and commission.

Indirect
Compensation
Indirect compensation – includes benefits given by
employers other than financial remunerations; for
example travel, educational and health benefits, and
others
 Nonfinancial
Compensation
Nonfinancial compensation – includes recognition
programs, being assigned to do rewarding jobs,
or enjoying management support, ideal work
environment, and convenient work hours.
Compensation: A Motivational
Factor for Employees

Compensation pay represents a

reward that an employee receives for
good performance that contributes to
the company’s success. With this, the
following must be considered:
 PAY EQUITY
Related to fairness; the Equity Theory is a motivation theory
January
focusing on employees’ response to the pay that they receive and the
feeling
that they receive less or more than they deserve.

EXPECTANCY
Expectancy Theory – another theory of THEORY
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.
 BASES FOR
COMPENSATION

Employees may be
compensated based on the
following:
 PLECEWORK
BASIS
When pay is computed according to
the number of units produced.

HOURLY
WhenBASIS
pay is computed according to the
number of work hours rendered.

WEEKLY
When pay is computed according to
BASIS
the number of workweeks rendered.

MONTHLY
When pay is computed according to the
BASIS
number of the work month rendered.
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
These arePurposes
fulfilled through appraisal/evaluation programs that
provide information about employee’s performance and their
strengths and weaknesses that may be used as a basis for
identifying their training and development needs.
 PERFORMANCE APPRAISAL
METHODS
Methods of evaluating workers have
undergone development to adapt to

new legal employment requirements

and technical changes. Some appraisal
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
initiative.
 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

Promotion: by the
Performance following
Appraisal
helps the supervisors
advantages: to chalk
(Enriquez, out the
2016)

promotion programs for efficient

employees. In this regard, inefficient
workers
➢ 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

➢ Employees Development:
bonuses, high salary rates,The systematic
extra procedure ofand
benefits, allowances, performance
pre

appraisalare
requisites helps the supervisors
dependent to frameappraisal.
on performance training policies and
The criteria

should be to
programs. It contributes merit rather the
analyzing thanstrengths
seniority. and weaknesses
➢ 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, self

appraisal, subordinate appraisal,

customer appraisal, peer appraisal, team

appraisal, or 360-degree appraisal) may

sometimes fail due to various
• the inadequate orientation of the • inflated ratings resulting from the
evaluator’s avoidance of giving
evaluatees regarding the objectives
of the program;
low scores;
• incomplete information of the January
• evaluator’s appraisal is focused on th
evaluatees (e.g. proper answering personality of the evaluatee
ofthe evaluation questionnaire);
• bias exhibited by and not his or her performance;
evaluators; • the unhealthy personality of
• inadequate time for answering the
the
evaluation forms;
evaluator; and
• ambiguous terms used in • the evaluator may be influenced
the by
evaluation organizational politics.
questionnaire;
• employee’s job description is not
properly evaluated by the
evaluation questionnaire used;
 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 that pertain to money, finance, or
rewards 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
– a compensation package for executives of organizations which
Pay
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
 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

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
Employee relationships apply to all phases of work activities in organizations,
and managers to be effective, must be able to encourage good employee
relations among all human resources under his or her care.
Employees/workers are social beings who need connections or relations with
other beings – other employees/workers – who can give them social support
as they carry out their tasks in the organization where all of them belong.
Talking to a co-worker, perceived to be a friend, or working on a delicate task
with others can be comforting during times of stress, fear, or loneliness.
When these negative feelings are overcome, employees will be able to work
better toward the achievement of their organization’s goal.
 Effective Employer Relations and
Social Support
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

 Below are some barriers to good
employee relations:
• Anti-social personality: refusal to share more about oneself to
co

employees; being a loner

• Lack of trust in others

• Selfish attitude; too many self-serving motives

• Lack• of good self-esteem

Communication problems: refusal to listen to what others seek to
• Lack of concern for others’ communicate.
• Not a team player
Here are some ways to overcome barriers to
good employee relations:
•Develop a healthy personality to overcome negative attitudes
and

behavior.
• Overcome tendencies of being too dependent on electronic

• Find time to socialize with coworkers.

gadgets.

• Develop good communication skills and be open to others’

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)
1.Productivi
Strong employment relations create a pleasant atmosphere within the
ty
work

environment; it increases employee motivation and can also be

increased

through improved employee morale. Companies that have invested in

2.Employee
Creating a productive and pleasant work environment has a drastic effect
on
Loyalty
employee relations programs have experienced an increase in
productivity,
an employee’s commitment to the firm, it encourages a loyal workforce.
and therefore, the increased productivity leads to increases in profits for
the
Having such a labor force improves employee retention, in doing so the cost
 3.Conflict
When aReduction
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
 Three Types of
Employees
•employees who work with passion and feel a deep connection
Engag with their company
ed
• they drive innovation and move the organization forward
Not • employees who are essentially “checked
Engaged out”
• they put time, but not energy or passion, into their
work
ively •employee who are not only unhappy at work but also act
out their unhappiness
Disengaged
•they undetermine what their engaged co-workers
accomplished
 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
Employees or workers unionize because of financial needs,
unfair
their fight for their collective or common interests.
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.
 C. 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 andBohlander (2011) for the following union-
organizing steps:
 Step 1. Employee/Union
Contact
Before deciding to form a union, employees think about the good and bad
things that might happen if they do. Meanwhile, union leaders collect
information about the problems employees are facing and how the
company is run. This information helps them build a case to show that the
employees need a union to protect their rights.

Step 2. Initial organizational

meeting
This is conducted 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
To start a union, employees need to find other employees who
are willing to help lead the effort. They ask these employees to
sign a card saying they want to join a union. If at least 30
employees sign, the government agency called the National
Labor Relations Commission (NLRC) will allow a vote to see if
most employees want a union. The more employees who sign
the card, the stronger the union will be.
 Step 4. If asufficient 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
Before they start talking about the deal, both the union
and the company gather information to support their
demands. They choose people to represent them at the
meeting. These people will discuss and negotiate the
terms of the agreement. They also collect data like how
much money the company is making, how many people
have been promoted or moved to different jobs, and how
many times there have been problems between
employees and the company. This information will help
them make their arguments stronger.
 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
– this consists of bargaining, analyzing proposals, resolving
issues related to the proposals, and remembering to stay within
their respective bargaining zone. If no greement is reached at
this point, a deadlock may result.
 D. Formalize
agreement
– after the negotiation process, the union and the management
group have to formalize their agreement. This agreement is a
formal binding document that lists down the terms, conditions,
and rules under which employees and managers agreeto
operate; the clear language must be used in the contract, which
has to be ratified by the majority of the employees. After
ratification,
all the members of the union and the management bargaining
teams, as well as the president or chief executive officer of the
organization, must sign the document before its dissemination
to all parties concerned.
 Grievance
Procedure
The grievance procedure is a formal procedure that
authorizes the union to represent its members in
processing a grievance or complaint. Such grievance must
be expressed orally or in writing to the employee’s
immediate supervisor and the union steward. If the
immediate supervisor shows a willingness to discuss the
complaint with the employee and the union steward, the
grievance may be resolved immediately.