WAGE AND SALARY ADMINISTRATION

THE ROLE OF HUMAN RESOURCES IN THE PAYMENT OF SALARIES -The Human

Resources department plays a crucial role in ensuring proper salary and wages for
employees. Pay is essential for employee motivation, job satisfaction, and company
status. It also impacts the standard of living and community position, and must be
commensurate with efforts and contributions to the company's profitability index. A
satisfied employee stays longer and develops a working team, benefiting bot parties.
Plan salary levels to maintain competence and maintain morale. The department's
primary duty is to set high wage scales to attract better employees and contribute to
profitability, while maintaining profitability without compromising profits.

THEORIES OF WAGES - Wages theories focus on labor payments in competitive

enterprises, focusing on manpower contributions for achieving profits and capital. They
represent shares paid for land, capital, and profits.

CLASSICAL WAGE THEORY- Classical Wage Theory posits that labor is a commodity
with prices based on supply and demand. Higher wages are necessary for laborers to
survive and perpetuate their race. When labor supply is below industrial requirements,
competitive bidding leads to increased wages. When labor prices are below natural
prices, laborers' conditions worsen, deprived of essential comforts.

THE JUST WAGES THEORY OF ST. THOMAS AQUINAS - St. Thomas Aquinas' Just
Wage Theory states that a just wage allows workers to live according to their position in
society, prioritizing their cost of living over production costs. This theory is the basis for
minimum wage laws and addresses basic subsistence living requirements. The Tri-
partite Board, consisting of Labor, Management, and the Department of Labor, is a
solution to implementing just wages.
THE WAGE FUND THEORY -The Wage Fund Theory, developed by John Stuart Mill,
posits that the nation's working capital provides a fund for wages, which is divided
proportionately among workers. An increase in wages through collective bargaining will
negatively affect others. This theory suggests that increasing wages would redound to
decrease wages in other sectors, as the fund should be elastic for other factors of
production, such as capital, maintenance, materials, and labor. Factor of production,
such as capital, maintenance , materials, and labor.

BARGAINING THEORY OF JOHN DAVISON - John Davidson's bargaining theory

suggests that labor is a commodity with a price determined by the bargaining process
between buyers and sellers. Labor sets the value of their services based on the utility of
reward, which is conditioned by their actual standard of living. This theory leads to labor
unions, who negotiate with management to set discounted labor values based on
output. Labor demands living wages to sustain a decent living condition, which can lead
to strikes or lockouts.

THE MARGINAL PRODUCTIVITY THEORY -The marginal productivity theory provides

a better explanation for wages in modern industries. The supply of labor depends on the
total number of individuals available for work. Workers' mobility, which involves transfer
from one company to another due to opportunities, affects wages in the industry.
Mobility is not determined by the amount of movement, but by the degree to which
existing job differences call for worker movement. The hiring of added labor force is
based on the assumption that it will contribute to increased production output or product
quality. However, any increase in manpower tends to decrease the value of the
marginal product as the number of workers increases.

THE PURCHASING POWER THEORY -The purchasing power theory explains the
relationship between wages and economic activity, highlighting the importance of
savings for economic growth and employment opportunities.

LABOR THEORY OF VALUE- Karl Marx's Labor Theory of Value emphasizes that
labor is the source of all products and must receive a greater share of profits. Organized
labor groups, who share profits with labor, believe that profits are surpluses from other
factors of production, which are pocketed by capitalist businessmen. This theory
suggests that profits should be shared with labor, as they create goods that generate
surplus incomes. However, if employer's actions contradict activist labor unions, labor
unrest can negatively impact labor, management, and economic growth.
THE STANDARD OF LIVING THEORY OF WAGES-The Standard of Living Theory of
Wages suggests that wages should be based on the cost of living, which depends on
family economic needs for basic necessities. This approach is economically sound due
to global economic activity and competition. However, increasing economic growth
would lead to increased wages, which in turn would increase consumption. Government
labor and management must collaborate to determine living wages for industries and
regions.

WAGE AND SALARY SURVEYS - Wage and salary surveys determine the actual
salary for each job, as salaries from other companies impact employment, morale, and
turnover rates. Most companies participate in these surveys or conduct their own, using
informal or formal methods. Informal surveys involve telephones and interviews, while
formal surveys use questionnaires based on benchmark jobs in other industries.

PROCEDURE IN CONDUCTING WAGE AND SALARY SURVEYS- Conducting wage

and salary surveys requires the Human Resources Department to study available data,
including job titles, descriptions, shift premiums, overtime, wage payment methods, and
paid holidays and vacations. This ensures accurate comparisons and ensures accurate
job matching.

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 step adjustments. It is to
provide adjustment in pay for performance evaluation without distorting the salary pay
plan.

SALARY ADJUSTMENTS WITH HIGH SENIORITY- 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.

2. 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 implementation of the new structure.
METHODS OF WAGE PAYMENT- The main purpose formal wage and salary
management plan is to have a systematic methods of payment to ensure that
employees received a fair wage and salary for the work they perform.
Salaries may be the same but one company may pay on hourly basis plus piece work.
There are two methods of paying salaries:
1. By the Time Worked
-In this method wages, are computed in terms of unit of time. This plan are computed by
multiplying the number of hours by the rate per hour, as follows.
HxR=W
In which H- Hours actually work
R- Rate per hour in pesos
W- Total wage earned
Payment on the basis of the time worked is more satisfying under the following
conditions:
1. Employees have a little or no control over how much work they produce.
2. There is no clear-cut relationship between the effort made to produce the work and
the amount work produced.
3. Work delays occur often and are beyond the employee control.
4. Quality of work is very important.
5. 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
paying wages is called an incentive wage plan. The most common incentive plan is
called piecework. Piecework salaries are determined by the numbers of pieces
produced or completed and each piece is assigned a piece value that is called piece
rate. The formula for computing salaries under piecework is as follows:
NxU=W in which
N- Number of units produced
U- Rate per unit in pesos
W- Wages earned per day or per week
Payment by piecework is satisfactory under the following conditions:
1. When a unit of completed work can be measured easily.
2. When there is a clear relationship between a workers effort and the results of his
efforts,
3. If 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 standard
procedure, with few interruptions.

WAGES AND SALARY POLICIES

The company of organization must have a clear-cut wage and salary policy. The wage
and salary must appeal to all employees and stimulate them to greater efforts.
These characteristics include the following:
1. The wage and plan must be easily understood.
2. Salaries in the wage plan should be easily computed.
3. Salaries must be made relevant with efforts.
4. Incentive wage plan should provide payment for incentive earnings to employees
soon after they have been earned efforts exerted to reach the standards.
5. The method of payment should be stable and unvarying.

MORALE RENEWAL IN THE WORKPLACE

1. Know that the leaders have limitations.
2. Choose character
3. Walk the talk
4. Avoid compromising
5. Use the same measures on yourself
6. Face the mirror
7. Show the mirror to your leaders.
8. Don't just admit mistakes; correct them.
9. Have an improvement plan.
10. Rebuild and do not slide back.
LABOR AND WAGES
Wage and salary administration is defined as the process by which wage and salary
levels and structures are determined in organizational settings.

Wages are payments for labor services rendered frequency. Expressed in hourly rates.
While a salary is a similar payment, expressed in weekly, monthly or annual rates.

Thus the term “wage” frequently connote payments in terms of the number of hours
worked and may fluctuate depending upon hours actually worked.
The determination of wage rates, administration of age policies and satisfying the
employees as regards to wages and rate of wages is an important aspect of wage
administration.

SKILLED LABOR- Highly trained. Educated or experienced segments of the workforce

that can complete more complex mental or physical task on the SOB.

UNSKILLED LABOR- Labor that requires little or no training or experience for its
satisfactory performance.

PROFFESIONAL- Requires the highest levels of education and training.

These labor grades are frequently referred to as non-competing labor grades. The
expense of education and training might be a substantial impediment. They may lack
the chance to make such a move, as well as the initiative.

The method of using two-dimensional graphs. The graph is used with the points system,
and the value points for important jobs are drawn based on the evaluation points and
grades. Following that, all salary survey data should be plotted.
An examination of the graph will indicate the trend of the plotted. A line is drawn to
indicate this trend, using of the ff. techniques.
1. EYE INSPECTATION- This technique is the least scientific and reliance as this
does not require scientific computation.

2. THE LEAST SQUARE - This uses the statistical formula. It presents (the data)
more accurately. The relationship between PESO or money value and the points
for the less key job.

3. THE SECOND DEGREE CURVE - Another type of statistical formula. The trend
line will take normally the form of a curve and more accurately indicate the trend
of the data.

It does not have a set of decision-making rules. It is also used to simplify processes
using two-dimensional graphs. Within the point system, a graph is used to depict the
value points for the main task based on the assessment points and grades. Following
that, the entire day's survey or (surveyed) data will be plotted.
 REFLECTION ON WAGE AND SALARY ADMINISTRATION

Wage and salary administration is an important part of human resource management

that includes the planning, evaluation, and distribution of remuneration within a
company. This procedure entails evaluating fair and competitive pay for distinct work
categories while taking into account aspects including industry norms, job
responsibilities, skill needs, and market conditions. Wage and compensation
administration that is effective attempts to recruit and retain talent, inspire employees,
and maintain equitable pay practices.

The emphasis on ensuring internal equity and external competitiveness is a key

reflection of wage and salary administration. Organizations must strike a balance
between ensuring that their employees' pay is commensurate with their duties and skill
sets and being competitive in their industry. This necessitates a constant assessment of
work duties, job descriptions, and market trends in order to avoid overpaying or
underpaying personnel, which could lead to discontent and turnover.

Furthermore, wage and salary administration has a considerable impact on company

culture. Employees develop a sense of trust and job satisfaction when they believe their
compensation is fair and transparent. Inequities or discrepancies in compensation, on
the other hand, can lead to demotivation, low morale, and even legal problems. As a
result, firms must develop clear and well-communicated compensation plans that
indicate a commitment to equitable treatment of their employees.

Finally, wage and salary administration is an important component of managing a

productive and motivated team. Striking the correct balance between internal fairness
and external competitiveness, together with open and transparent remuneration
procedures, leads to a positive organizational culture and the retention of valuable
people. Organizations may ensure that their wage and salary administration stays
successful and representative of their commitment to employee well-being and success
by continuously analyzing market changes and matching compensation with job duties.
 THE MANAGEMENT OF EMPLOYEE BENEFITS AND SERVICES

The Beginning of the Fringe Benefit Concept

The patemalistic concept of fringe benefits originated as welfare work by employers
among employees and their families, gaining loyalty, cooperation, and goodwill. These
early concepts viewed employees as dependent members of a large family, and the
company maintained their job satisfaction. Some companies provided free meals, family
quarters, and other services, while others provided housing. This concept worked well
when the company was small and the employees were few. However, as the company
expanded and the workforce increased, the granting of fringe benefits decreased. Some
employees considered these benefits as dele-outs, while those who remained loyal
received regular benefits.

The formation of company unions led to an active quest for fair treatment of all
employees in the granting of benefits and services. This movement led to more prudent
treatment of benefits, and now specific company guidelines and procedures cover the
granting of benefits. Management now recognizes that employee services and benefits
should be based on sound management principles of coexistence with the employees'
organization. The concept of fringe benefits has evolved over time, with companies now
recognizing the importance of fair treatment and fair treatment for all employees.

The Concept of Benefits

Benefits are additional compensations provided to employees that contribute to the
improvement of work conditions and motivate them to perform better. They are provided
regularly at regular intervals as stipulated in company policies and guidelines. The main
purpose of benefits is to develop commitment and loyalty, and to keep good employees
in the company roster.

Management has shifted to recognize employees as partners in their development and

progress, recognizing that they are exposed to work hazards and economic problems
due to rising living costs and hospitalization costs.
Management is now more concerned with employee welfare and social responsibility,
while the government recognizes employees as contributors to the country's economic
development and has passed legislation that offers more benefits to 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.

The Classification of Benefits could be classified under the following:

1. Statutory Benefits-are benefits mandated by law such as:
a. 13 month pay given half in June and half in December
b. Five-day incentive leave
c. Birthday leave
d. Maternity leave with pay for married women
e. Paternity leave with pay when husband's wife gives birth f. Pag-ibig Fund - housing
loans through employer-employee contributions
g. Medicare Fund - for medical expenses of employees and dependents
h. Social Security Benefits retirement, pension, death, burial, disability, sickness,
medical rehabilitation, employee compensation in case of accident in the performance
of work
i. Cost of living allowance
The Governing Philosophy in Granting Fringe Benefits
1. Benefits Granted should not be interfere with company operations and
managements has the prerogative to control the same.
2. The benefits should be fair to all employees of equal rank and positions and
should be capable of uniform.
3. The benefits must have mutual value to both employers and the employees
concerned.
4. Benefits must be measured in terms of employees’ services to the company.

Benefits classified under the following:

Company benefits – These are benefits granted by the company outside of those
mandated law. These benefits could be through a collective bargaining agreement and
those that are given unilaterally by management.

A. Vacation Leave with Pay

Philippine employees are legally entitled to 5 days of paid service incentive
leave, which can be used for vacation or sick leave. However, we typically see
good employers offering 15 days of paid vacation and 15 days sick leave for
most professional level positions in the Philippines.

B. Sick Leave with Pay

Employees who can’t report to work due to sickness or disability can apply for
sick leave.

C. Bereavement Leave
House bill 6043 provides that employees in the private and public sectors shall
be entitled to a bereavement leave of 10 days will full pay following the death of
an employee immediate family member.

D. Hospitalization Plan
These plans are specifically created for individuals and families who want to have
coverage for hospitalization, out-patient, preventive healthcare, emergency,
member's financial assistance, and dental care.
 E. Sickness and Accident Insurance Plan
Accident and Sickness insurance provides cover as portion of the insured
person’s income (up to 85% of weekly earnings) if they are unable to work due to
covered event arising from a bodily injury or sickness.

REFLECTION ON BENEFITS AND SERVICES

People are not your important asset. The right people are. Quoted by Jim Collins.
This quote sums up what benefits managers know to be true. Finding and keeping the
right employees is the key to a company’s success. That’s why creating the right
benefits package is so important. Financial and medical insurance tend to make
employees feel more secure, devoted, and engaged at work. Employee perks are things
that employers provide to employees that go above and beyond monetary remuneration
in order to assure their general well-being and pleasure.

Employee health benefits are crucial for several reasons, including increased
productivity, employee engagement, and company expansion. They also help you stand
out from the competition in the market, draw in top candidates, and keep them on
board.

The company culture, enhanced teamwork, and work-life balance are all influenced by
employee benefits. They promote a thoughtful workplace, better employee health and
engagement, and a culture of welfare and wellness. By enabling employees to take
parental or sick breaks, which frees them up to concentrate on themselves and their
families, employee benefits also assist in maintaining a healthy work-life balance. In the
end, this balance improves overall business performance by keeping people content,
more productive, and engaged.
 CHANGES IN PERSONNEL STATUS

The proper movement of the employee in the organization is called placement that
could be defined as the assignment of the right man to the right job.

Promotion- is the movement of an employee from lower to higher level in the

organizational ladder.

Rationale for employee promotion

1. Recognition and reward for good performances.
2. Incentive for employees to improve academically and professionally and to prepare
themselves for new challenges in the job.
3. Employees who are promoted usually know the job well rather than hire new
employees outside the organization.
4. Boost employee morale and develops greater loyalty to the organization.

Important factors in promotion

1. The company must consider the seniority rule. All things being equal, the first to be
hired must be given the priority to be promoted.
2. Careful analysis of the qualifications of the individual has to be subjected to a series
of tests, interviews, and records check.
3. Attendance records and performance for the last two to three years have to be
examined.
Employee transfer- This may be defined as the movement from one job to another of
equivalent rank or position at the same pay class within the organizational. The policy
manual must state the following.
1. The person who should initiate transfer.
2. The authorized personnel who will approve the transfer
3. The reason why an employee has to be transferred.
4. The status of the employee.

Kinds of employee transfer

1. Temporary transfer
2. Permanent transfer

Transfers are useful tools for some operational needs of the company due to the
following:

1. Meet the company need during peak seasons. An employee may be

transferred as a necessity of operational demand.
2. Protect the health and safety of the employee.
3. Meet expansion needs.
4. Correct an error in the hiring of the employee.

Demotion- defined as the movement of an employee from his present job to a

job of lower rating or in a lower grade.

Demotion is resorted to by management under the following conditions:

1. Slack business demand and operations reducing manpower budget
2. Inability of the employee to meet the job requirements for the position he was
hired.
3. Failure of the employee to meet technical changes in the job.
4. Demotion is resorted to when the employee commits an infraction of the
company’s rules and regulations and the penalty for the offense is short of
termination.

Employee separation and termination- The termination of employment

relationship between the employee and the employer is called separation.

Causes of employee resignation:

1. Better job opportunities on other companies or outside the country.

2. An employee seeks higher wages and better working conditions.
3. An employee resigns due to misunderstanding with his immediate superior.
4. A worker resigns from employment due to the distance from work because of
change in residence.
5. Most women employees resign from employment due to change in marital
status.

Procedure in handling separation of employment:

1. Employee clearance- make sure that the employee is cleared of all money
and property responsibilities before he is paid with whatever benefits.

2. Conduct exit interview- it is an attempt to find out the actual reason of all
employees in resigning from the company.

a. Determine the real cause of the employee’s resignation.

b. Determine that all required papers related to his separation are properly
accomplished such as those of social security system (SSS), philhealth,
pagibig fund other government agencies.

c. Create in the employee the impression of goodwill toward the company that in
spite of the separation, the company is still interested in his personal welfare.
d. Create an impression to the employee that the company is still interested in his
career as he is an asset employee.

e. An employee who is compulsory retired, according to the law, after serving the
company the best years of his life, should be awarded a service merit plaque or
certificate of recognition in an appropriate occasion.

Procedure in handling lay-off and suspension of relationship:

1. Determine the total number of employees that will be affected by total

permanent lay-off and those of temporary lay-off.

2. Determine the total amount involved according to the law or collective

agreement and the amount the company will spend in paying the separation
pay of a employment.
3. Determine the skills and job requirements that would still be needed by the
company in cut-size operation to maintain viability and company
sustainability.

4. Determine those who can be trained for new jobs that will still be needed by
the company in case of new operation requirement at the option
management.

5. Determine all the potentials, skills, knowledge, and lengths of services of

employees before making the first-come -last-out policy in the separation of
an employee to keep the company afloat during critical times.

Causes of employee turnover:

1. Poor supervisory practices.

2. Poor company policy of attracting potential and good employees.
3. Good opportunities in another country or another company.
4. Poor selection, hiring of employees, training and inadequate supervisors
 REFLECTION ON CHANGES IN PERSONNEL

Promotion is a change from one post to another with an increase in tasks and
responsibilities as permitted by law. It is typically accompanied by a raise in
compensation and is based on seniority, performance, qualification, and eligibility as
well as death, termination, and retirement. Each department within a government
organization is required to create a merit promotion plan in accordance with the rules
and regulations given out by the commission. Similar to this, there are elements that go
into defining the level of ability and qualification of personnel, such as performance,
education, and training, experience, and significant accomplishments, physical traits,
personality traits, and potential.

Additionally, there are different employee term groups, such regular/permanent,

contractual, casual status, probationary, job order, project-based, and fixed contract.
Similarly, there are numerous employees such as employer, worker, manager, boss,
and line-of-business. Transfer also refers to moving from one post to another of
comparable status, level, or payment without interrupting the work relationship or from
one office to another under the same organization.

On the other side, a transfer might result in a demotion, which is a drop in position, rank,
or payment. As a result, the employer has the authority to demote and transfer a worker
who has shown a lack of devotion in his work and a habit of tardiness, absences, and
laziness when performing his assigned duties. Therefore, transfers, promotions,
demotions, and employee separations are all considered changes in personnel status.
Change will always occur. Although it might be awkward and uncomfortable, it can also
be advantageous in the way that it may help a company in keeping up with market
trends, generating new chances, fostering innovation, increasing efficiency, and
enhancing attitude.