INTRODUCTION. right cost corresponding to it. This

Published by admin on


Imagine yourself doing something that is beneficial to others for
nothing. Imagine yourself working 8 hours a day five to six times a week for a
very low return. Imagine yourself working hard for the benefit of the
organization and receiving unlikely compensation. Imagine yourself working into
an organization that lacks financial motivation.

Human Resources are one of the key assets that is need for an
institution to run. In order retain and push them to perform well or go beyond
maximum is to give them motivations to do so, one by having good compensation
administration. So this writings objective is to:

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

Points components of financial Compensation;

Know the factors that affect financial

Discuss how base compensation is arrived at;

Define and discuss methods/types of Job
Evaluation; and

Discuss government mandated benefits,
employee benefits and good supplementary compensation (incentives).


Financial compensation is a result of having
job evaluation by giving the job the right cost corresponding to it. This consists
of base pay in the form of wages or salaries, incentives, and benefits provided
by law and/or by the agreement of the management of the organization.  This
is given in reward for the performance, effort, seniority, skills held, job
difficulty and the like.

The wages or salaries that an employee
receives will be the determinant of the prestige or status (or lack of it) in
society that a man will possess as he seeks to attain individual,
organizational or societal goals. For this reason, financial compensation
deserves special attention from organizations if manpower resource maximization
is to be pursued (BOOK, 2004).

Objective of a good compensation

It enables an organization to attract and
retain qualified, competent workers. It motivates employee’s performance,
fosters a feeling of equity, and provides direction to their efforts. Attracting
the talent by offering a well-designed pay package and retaining it. It is
important for the pay to be competitive in order to attract and retain the best
employees for positions. Also it supports, communicates, and reinforces an
organization’s culture, values, and competitive strategy, especially long-term
strategy. Its cost structure reflects the organization’s ability to pay. It
complies with government laws and regulations.

Therefore organization have to design
compensation systems that talent and skill not only get attracted but also stay
with the organization. Employees may have talent but they will not be motivated
to use their talent unless they know that they will be rewarded duly for their
contribution towards the organizational objectives.


Having a good compensation package is more
likely depends on the agreement of both parties. The employee is entitled to a
salary that is enough for his/her service rendered without breaking the bank of
the employer’s business organization. However, in order to arrive at an
agreement between both parties, the following factors that affects financial
compensation must be considered.

Cost of living;

Wages and salaries paid by the other
companies in the same and other industries in the country;

Supply and demand of labor;

Company’s ability to pay;

Strength in labor unions, and

Governmental regulations and control.

Cost of living

Cost of living is one very important factor that
should be determined and considered prior to making final agreement with
regards to what compensation is given. I could never imagine myself being paid 250
Philippine peso a day working at a highly expensive area like Manila, were one
piece banana would cost you 10 pesos, a one kilo rice also would cost you 60
pesos plus your transportation from your house or apartment to your work place
would cost you a hundred a day. In short the pay I get in a day is not enough
for my needs and could not cater my future wants. In this case every company
must determine how much is the cost of living in their place that probable employees
wanting to be a part on their work team will not be financially drained. Unfortunately
in the Philippines there’s still company’s paying their employees at a minimum
that is not enough to cater their employees basic needs.    

and salaries paid by the other companies in the same and other industries in
the country

Organizations wages and salaries must be of
the same or preferably higher than those of the same nature of business
institutions. It is of the trend nowadays most specially to millennials, they
tend to look for a high paying place to work than having a good work experience
and later on looking for it. Millennials are quite choosy with regards to
picking which place to work simply because they have a lot of wants to acquire
in their daily lives. It simply means to them the higher the offer of one out
of the selected company to work with, the greater the chances for them to get
the job. Also the higher the pay rates given to the employees plus a good goal
incentives would push them to work beyond the limit that will contribute
success to the organization.

Supply and demand of Labor

Using the same supply and demand law,
salaries and wages are being governed to it too. The greater the demand of the
particular labor and the supply is low, the pay rate of that particular job is
higher. Probably one good example of it is the nursing related profession. In the
Philippines there are great supply of nurses here that makes their profession low
in market value before, where in fact some schools that offers BS Nursing was
forced to suspend the course, just like what happened to my school at Christ
the King College – Gingoog City in the year 2011, due to the fact that nurses
population in the Philippines are increasing but there are no room for them to practice
their profession. So they go to other countries lacks nurses in there they tend
to get high salaries and wages. In effect the Philippines now are on crisis of
having low nurses supply. This simply means that the pay rate are being
affected due to the supply and demand of that particular labor being needed in
the organization.

Company’s ability to pay

            It is very obvious that
company’s ability to pay does really have an effect to the pay rates of the
employees and probable employees that they have. If on company is operating at
a maximum and has a high operating income would usually give their employees a
fat salaries and wages, who would not like that? But a company having low
income and is having financial crisis would usually have no choice but to cut some
employees off their payroll ,and for the remaining will have a low rates just
like what happen here in my workplace before.

Strength in labor unions

            The strength of labor unions represents
the employees in one factor that affects the financial compensation paid to
personnel. Through labor organizations or labor unions, employee’s financial
compensation are far better than what the legislated minimum benefits
compensation provided (BOOK, 2004).

Government regulations and

            In the Labor code of the Philippines (that
is set by the Department of Labor and Employment or known as DOLE) set a minimum
statutory wage depending on the different regions to be a standards as a minimum
wage for hiring an employee.  In Gingoog
City under region 10 our minimum 331 per day including COLA of 5. Also they
have set 13th month pay, Philhealth, SSS (GSIS in government) and
PAG-IBIG as statutory benefits included to the monthly minimum salary. So in
the Philippines it is illegal to have a labor force being paid under that
mandated statutory benefits. The company proven that is in violations to such rulings
can be subject to a litigation filed by the complainant under DOLE. According
to (BOOK, 2004) “These legislations are imperative to enforce
the constitutional provisions to free the people from poverty through policies
that provide adequate social services, promote full employment , a rising standard
of living and improvement in the quality of life for all”.

Base compensation

            Base compensation are being established
by having Job Evaluation. This refers to the varying rates of wages and
salaries that a personnel are paid on account of the different jobs or
positions existing in an organization.

            Job evaluation simply
means giving cost to the job that answers the question “How much is the Job?”
There are many systematic methods of evaluating the Job that established wage
rates corresponding to a particular jobs. This would also eliminate pay

Methods of Job evaluation

            There are different types of job
evaluations group under non-quantitative methods and quantitative methods. In having
job evaluation plan the eleven major job factors are being considered in to.




Initiative and ingenuity


Physical demand

Mental-visual demand


For equipment

For material or product

For safety of others

For work of others

Job or Working Environment

10.  Working

11.  Hazards

So these are the job factors that are
considered into in deferent job evaluations. By the way job factors varies in
from any organizations depending on the nature of it business. So here are the
four methods of job evaluation: Under Non-quantitative method is Simple Ranking Method and Grading or Job classification method;
and under Quantitative method is Point
or manual method and Factors
Comparison method.









D. (2015). Fundamentals of Human Resources Management fifth Edidtion.
New York, NY: American Management Association International.
BOOK, J. (2004).
Dr. Bussin, M.,
& Diez, F. (2017). The Remuneration Handbook. Randburg: KR
Philippines, R. o.



Categories: Articles


I'm Iren!

Would you like to get a custom essay? How about receiving a customized one?

Check it out