Components Component # 

3. House Rent Allowance:

of Compensation Management – Basic
Wage, Dearness Allowance, House Rent Organizations are set up in various types of
Allowance, Other Allowances, Incentives locations such as urban centres; industrial
and Fringe Benefits belt, etc. where houses are not available at
a reasonable rent.
Employee compensation is one of the most
strategic and important functions of human If the employees are required to pay house
resource management. It continues to rent as per the prevailing market rates, a
evolve as part of a system of all the substantial portion of their wages will go as
combined rewards that employers offer to house rent and the employees will not be
employees. Compensation is considered as left with sufficient money to meet their other
part of a total rewards system which mainly requirements.
includes basic wage, dearness allowance,
house rent allowance, other allowances, Component # 4. Other Allowances:
incentives and fringe benefits.
Apart from the basic, dearness allowance,
Component # 1. Basic Wage: many other allowances are paid to
employees to compensate them adequately
Basic wage is fixed on the basis of so that the total package of remuneration
weightage given to jobs in an organizational provides them suitable compensation
context at various levels on the basis of package.
skills, efforts, qualifications, etc. which are
required to perform those jobs. Component # 5. Incentives:
Determination of weightage given to each
job is done on the basis of studies carried Incentive compensation is
out by industrial engineers along with other performance-linked remuneration paid with
experts. Practices prevailing in other similar the aim to encourage employees to work
organizations are also taken into more and perform better. Both individual
consideration. incentives and group incentives are used.
Bonus, profit-sharing, commissions on sales
Component # 2. Dearness Allowance: are some examples of incentive
compensation.
Employees are employed with a particular
wage or salary rate. In due course of time Component # 6. Fringe
due to price increase, the real income of Benefits/Perquisites:
employees goes down. It means with the
Different types of benefits are paid
same level of wages employees are unable
particularly to senior managers. Provident
to buy goods and services, which they were
funds, pensions, gratuity, encashment of
able to buy before increase in prices.
earned leave, company house, company
Dearness allowance is paid to employees
car, leave travel concession (LTC), medical
by way of compensating them for the loss of
aid, interest free loan, holiday homes,
real income caused to them by increase in
entertainment, stock options, etc. are
the cost of living due to increase in prices.
examples of such benefits.
 incentive scheme is applicable to specific
individual employee’s performance but
group incentive scheme is applicable to a
group of workers who are required to
Components complete collectively a given work in a given
of Compensation Management – Wages time. The incentive amount paid to the
and Salary, Incentives, Fringe Benefits, group is divided among the group members
Perquisites and Non-Monetary Benefits on equitable basis.

Components of compensation means 3. Fringe Benefits:

components of remuneration to employees.
An average employees in the organized Fringe benefits which are given to employee
sector is usually entitled to various benefits. include such benefits as provident fund,
These benefits include both financial and gratuity, medical care, hospital allowance,
non-financial benefits. Specifically, the accident relief, health insurance, canteen
components of remuneration to an benefits, recreation, leave-travel allowance,
employee’s comprise wages or salaries, etc.
incentives, fringe benefits, perquisites and
non-monetary benefits. 4. Perquisites:
Perquisites are the allowances given
1. Wages and Salary:
executives and other higher level officers.
Wages and salary are generally paid on They include such allowances as company
monthly basis, though many times, wages car, club membership, paid holidays,
are paid on hourly or daily basis, whereas in furnished residential bungalows, stock
the case of salary, the number of hours option schemes, foreign travel benefits etc.
worked is not at all considered. Wages and
salary are subject to annual increments. 5. Non-Monetary Benefits:
They differ from job to job, depending upon
the nature of the job. Non-monetary benefits include such
benefits which are given in kind and not in
terms of money. They include such benefits
They also differ from employee to employee
as recognition of merit, issue of merit
depending upon the nature of the job,
certificates, job responsibilities, growth
seniority and merit. However, employees
prospects, competent supervision,
working in the same job such as teachers,
comfortable working conditions, job-sharing,
clerks, etc. get the same salary but wages
flexi-time etc
may differ from employee to employee
when number of hours worked also differs.
The Compensation Plan
2. Incentives: The Compensation Plan (CP) under RA No.
Incentives which are also called ‘payments 6758 is an orderly scheme for determining
by results’ are paid to the employees in rates of compensation of government
addition to wages and salaries. Incentives personnel. It was crafted to attract, motivate
depend upon productivity or efficiency of the and retain good and qualified people to
workers, sales effected, profit earned or accomplish the Philippine Government’s
cost reduction efforts. mission and mandates, to encourage
personal and career growth, and to reward
Incentives schemes may be classified as – good performance and length of service. To
(i) individual incentive schemes and (ii) achieve these goals, the CP has a mix of
group incentive schemes. Individual compensation components, namely; basic
pay or salaries, fringe benefits, incentives Gross Regional Domestic Product, among
and non-financial rewards which provide others), which insures better workers
reasonable levels of compensation protection.
packages within existing government
Wages play a major role in the economy by
resources, and are administered equitably
giving workers spending power. This refers
and fairly.
not only to the money workers earn that
3.2 Concepts of Compensation they spend on necessities, but also the
money they save or use in the short term for
3.2.1 Total Compensation – This
consumer goods, recreation, travel and
represents all financial and nonfinancial
investing.
rewards and entitlements arising from
employment relationship. Wage and Salary Administration – Nature
and Characteristics
3.2.2 Intrinsic Rewards - These are
Nature:
derived from the work environment, which
are valued internally by an individual, like 1. The basic purpose of wage and salary
quality of worklife, job satisfaction, administration is to establish and maintain
challenge, personal and professional growth an equitable wage and salary structure.
opportunities, feeling of belonging, freedom 2. It is concerned with the establishment
to act, visionary leadership, and the like. and maintenance of equitable labour cost
structure i.e. an optimal balancing of
3.2.3 Extrinsic Rewards/Entitlements –
conflicting personnel interest so that the
These comprise all compensation benefits,
satisfaction of the employees and
both monetary and non-monetary, and
employers is maximised and conflicts are
received directly or indirectly by the
employee. minimised.
3. The wage and salary administration is
3.2.4 Direct Compensation - These are concerned with the financial aspects of
cash compensation items which are either needs, motivation and rewards.
fixed or variable and are paid to an 4. Employees should be paid according to
employee for the performance of work. the requirements of their jobs i.e. highly
These include basic pay, cash allowances
skilled jobs are paid more compensation
and fringe benefits.
than low skilled jobs.
3.2.5 Indirect Compensation - These are 5. To minimise the chances of favouritism.
usually non-cash or in-kind benefit items 6. To establish the job sequences and lines
that contribute to the employee’s welfare, of production wherever they are applicable.
standard of living and personal 7. To increase the employees’ morale and
development. These include protection motivation because a wage programme can
programs such as insurances, paid leaves, be explained and is based upon facts.
perquisites and training programs.
SIGNIFICANCE OF WAGES Characteristics:
1. Payment of wages is in accordance with
Minimum wage rates are determined by the terms of contract between the employer
factors such as poverty threshold, prevailing
and the worker.
wage rates as determined by the Labor
2. The wages are determined on the basis
Force Survey, and socio-economic
of time-rate system or piece-rate system.
indicators (i.e. inflation, employment figures,
3. Wages change with the change in the - salary loans
time spent by the labourer. - life insurance
4. Wages create utility. - funeral grants
5. Wages may be paid weekly, fortnightly,
hourly, or on monthly basis. The contribution depends on the salary
6. Wage is the reward paid to the workers bracket of the employee. In general, the
for the services rendered by them. employer (ER) is responsible for
7. Wages can be paid in cash or in kind. contributing 7.37% of the total contribution,
8. All kinds of allowances are included in and the employee is responsible for 3.36%.
wages.
Statutory benefits, also known as
mandatory benefits, are entitlements that Health insurance
employers are obligated by law to provide to PhilHealth is the name of the health
their employees. Common examples insurance plan in place for private
include benefits like paid annual leave, employees in the Philippines. As of 2021,
parental leave, worker's compensation the monthly contribution rate for the health
insurance, and paid sick leave. insurance program is 3.5% of the
employee's basic salary. The monthly
In the Philippines, employers must pay a contribution is equally divided between
monthly contribution to the following funds: employee and employer. PHP 10,000 is the
salary minimum and PHP 70,000 is the
1. Social Security System (SSS) salary ceiling.

This state-run insurance program offers PhilHealth covers inpatient benefits,

benefits under the Social Security and outpatient benefits, Z benefits, and SDG
Employees' Compensation (EC) Programs. benefits (explained below):

The Social Security Commission Z benefits are offered to the patients who
administers the program. It is a body made need prolonged hospitalization and more
of representatives from the government, expensive treatment
employers, and employees. SDG benefits include treatment packages
for malaria, HIV-AIDS, tuberculosis, animal
Social insurance covers private-sector bites, and others diseases
employees, self-employed workers, as well Employers are not obligated to provide any
as household workers. A spouse of the specific insurance benefits since PhilHealth
insured person is also entitled to receive offers the above entitlements.
social benefits under this scheme.
Many global companies may opt out of
The benefits include: offering private health insurance to Filipino
employees as a result, but it’s still common
- maternity pay for many employers to offer secondary
- sickness pay health insurance to their employees to help
- pensions them access more specialized care (and to
- disability benefits
reduce wait times for more common Weekly rest day
treatment). Every employee in the Philippines is entitled
to get 24 consecutive hours of rest after six
Indeed, offering a health insurance benefit, consecutive working days.
or other additional insurance benefits (like
dental insurance, vision insurance, and life Public Holidays
insurance), can be such an effective way to The workers in the Philippines are entitled
build trust with new hires and separate your to two types of holidays: regular holidays
offer from that of a competitor in the and special holidays.
Philippines.

Regular holidays: There are 12 paid

Home Development Mutual Fund (HDMF) public holidays.
The HDMF, also known as Pag-IBIG fund, Special (non-working) holidays: On special
provides housing loans. It also offers (non-working) holidays, a no-work no-pay
financial assistance to Filipinos to enable policy is applied. If these days are worked,
them to afford decent housing. they can be paid. There are six special
holidays a year.
Workers who earn less than PHP 1,500 a
month contribute 1% of their salary to the Minimum wage
Pag-IBIG fund. Workers who earn more The minimum wage in the Philippines varies
contribute 2% of their monthly salary. between regions. Each region's tripartite
Employers have to contribute 2% regardless wage boards set the minimum wage rate,
of the salary bracket of the employee. which ranges from PHP 282 and PHP 537 a
day.
The highest contribution to HDMF fund
should not exceed PHP 200 in total (PHP The minimum wage rate also depends on
100 for employees and PHP 100 for the industry sector. The industry sectors are
employers). broadly divided into agricultural and
non-agricultural.
Working hours and holidays
In the Philippines, an employee's regular When an employee spends more than the
hours of work are a maximum of eight hours required eight hours working, he or she is
a day, excluding an hour’s lunch break. This entitled to additional pay, as below
does include short breaks for rest during the
working hour. Night shifts
The labor laws of the Philippines make it
Naturally, there are exceptions to these mandatory to pay night shift differential to
regular working days. It depends on the the workers working between 10pm and
company whether to extend them, but all 6pm. The nightshift differential must not be
rules below are applied to all organizations less than 10% of the worker's regular salary.
inside the Philippines.
Overtime
If an employee works more than eight hours
on an ordinary workday, they are entitled to Sick leave
an extra 25% of their average hourly rate. Insured employees are entitled to receive at
least 90% of their average daily wage if they
Premium pay get hospitalized or incapacitated at home for
Employees are eligible to receive premium at least three days. The three-day waiting
pay for working on their rest days or special period does not apply to the cases of
holidays. If an employee needs to work on injuries and acute diseases.
their rest day or special day, they receive an
extra 30% of their daily salary. If they work Employees who are ill are eligible to receive
on a special day that is also their rest day, 90% of their average daily salary for up to
they get 50% extra payment. If the work is 120 days in a year. However, the employee
performed on a regular holiday that is also a cannot claim this benefit for more than 240
rest day, the employee gets a total of 260%. days for the same illness. To be eligible, the
employee must have contributed to the
13-month pay entitlement Social Security System for at least three
13 month pay, or the colloquially named “13 months in the prior 12 months.
month salary” is a statutory requirement that
employers must provide to certain Employers are responsible for paying
employees. sickness benefits to their employees which
can then be reimbursed from the SSS.
All non-management employees in the
Philippines are entitled to receive Maternity and paternity leave
13th-month pay. This extra month of Both married and unmarried female workers
salary must be released by 24 December. are entitled to 60 days of paid maternity
Some employees opt to receive the leave for their first four pregnancies,
payment into two installments — in May including miscarriages.
and December.
This is dependent on them contributing to
Employees who have worked for at least Social Security for at least three months
one month for an employee are entitled to during the prior 12-month period. If a
receive the 13th-month pay. This is paid pro C-section is needed or there is an ectopic
rata for those who work less than the year. pregnancy requiring surgery, they are
eligible for 78 days of paid leave.
Employers need to file a compliance report
by 15 January of the following year to Married male workers can have seven days
confirm payment has been made. of paternity leave for the first four
pregnancies of their wives. Male workers
Service incentive leave can apply for paternal leave only when they
Employers in the Philippines are obligated are living with their spouse at the time of
to grant five days of paid leave to every delivery or miscarriage. They need to apply
employee who has worked for at least one for leave within a reasonable period.
year. This can be used either as sick leave
or vacation leave. Solo parent leave
Solo parents can take up to seven days’ Companies often offer additional benefits in
leave to fulfill their parental duties, addition to those that are mandatory
especially where physical presence is according to local employment law.
necessary. To be eligible for solo parent
leave, one must work for at least one year, If you develop and offer a globally
including holidays and authorized absence. competitive benefits package to Filipino
This one-year period of service can be talent, you’ll put your business in the right
continuous or broken. position to land a critical candidate over a
competitor. Even better – an equitable
Leave for victims of gender violence compensation plan will maintain morale,
In the Philippines, female workers who are harmony, and motivation for any globally
the victims of violence are entitled to ten distributed team (a critical factor for
days of paid leave. The violence may employee retention rates).
include physical, sexual, psychological, or
economic abuse. Job seekers are now actively searching for
certain perks in a global talent market where
Special leave for gynecological surgery remote work is readily available (we explain
Women requiring gynecological surgery in more detail in our values-based benefits
who have worked for at least six months are guide).
entitled to get up to two months of fully paid
leave. Creating a globally competitive and
compliant benefits package doesn’t have to
Bereavement Leave be complicated. Remote cares passionately
Employees can take up to three days of about providing perks and benefits to
unpaid leave on the occasion of a death in enable your global team to enjoy security,
the family. stability, and work-life balance. Our team of
internal HR specialists and global benefits
Retirement benefit experts are constantly working with our
The pension scheme in the Philippines is customers to create customized and
regulated under Social Security System. competitive benefits packages to attract top
Retired employees who have paid their talent.
contribution to SSS for at least 10 years
before their retirement are eligible to receive The size of your business shouldn’t prevent
a monthly pension. you from sourcing international talent either.
If you’re a smaller business looking to
Workers who have paid their contribution for employ Filipino workers or other
less than 10 years get a lump sum equal to international talent, your benefits plan
the contribution made by them and their doesn’t have to be cost-prohibitive.
employers, including interest earned.
This small business guide to affordable
global benefits will help you find inexpensive
Supplemental benefits to attract top perks that international employees will love.
talent in the Philippines
In the Philippines, if you want to attract the
highest calibre of candidates, you may
consider providing the following additional
benefits.

Competitive salary
The average wage in the Philippines is
around PHP 44,600 a month. As in any
other country, salaries vary widely
depending on job title, education, and other
factors. Attracting the best Filipino
candidates will undoubtedly be heavily
influenced by salary levels.

Additional paid leave

Paid vacation in addition to national
holidays and annual leave can be an
attractive incentive. Many companies
operating in the Philippines offer up to
eighteen days of paid vacation to their
employees. Some extra paid time off will
help international employers retain
high-performing employees.

Expanded parental leave

Similar to offering additional paid time off,
providing more globally consistent parental
leave provisions in the Philippines will be
met with loyalty and commitment in return.
In the Filipino culture, family connections
are strong and the extended family unit
tends to be very close.

As a result, any additional provisions aimed

at assisting with parental care are so highly
valued in the minds of employees.

Mid-year bonus
In addition to 13-month pay, many
companies offer an additional mid-year
bonus to their employees. It’s relatively
common for local employers to offer this
extra payment as an incentive to attract and
retain key professionals.