INTRODUCTION

Compensation administration is a segment of management or human resource management

focusing on planning, organizing, and controlling the direct and indirect payments employees
receive for the work they perform. Compensation includes direct forms such as base, merit, and
incentive pay and indirect forms such as vacation pay, deferred payment, and health insurance.
Compensation does not refer, however, to other kinds of employee rewards such as recognition
ceremonies and achievement parties. The ultimate objectives of compensation administration are:
efficient maintenance of a productive workforce, equitable pay, and compliance with federal,
state, and local regulations based on what companies can afford
.

The basic concept of compensation administration—compensation management—is rather

simple: employees perform tasks for employers and so companies pay employees wages for the
jobs they do. Consequently, compensation is an exchange or a transaction, from which both
parties—employers and employees—benefit: both parties receive something for giving something.
Compensation, however, involves much more than this simple transaction. From the employer's
perspective, compensation is an issue of both affordability and employee motivation. Companies
must consider what they can reasonably afford to pay their employees and the ramifications of
their decisions: will they affect employee turnover and productivity? In addition, some employers
and managers believe pay can influence employee work ethic and behavior and hence link
compensation to performance. Moreover social, economic, legal, and political forces also exert
influence on compensation management, making it a complicated yet important part of managing
a business.

COURSE OUTCOMES

✓ Understand the origin, nature, and definition and classification of labor laws relative to
the study.
✓ Understand the importance of equitable payment of salary and wages pertinent to the
difficulty and importance of the jobs they perform.
✓ Analyze the factors influencing compensation strategy.
✓ Apply salary computations to daily wage earners.
✓ Apply compensation strategy to managerial employees.
✓ Evaluate an effective compensation administration strategy
✓ Create an effective and efficient compensation administrative program.

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 LESSON 1
Significance of Remuneration

Overview

Compensation administration is a segment of management or human resource management

focusing on planning, organizing, and controlling the direct and indirect payments employees
receive for the work they perform.

Learning Outcomes: At the end of the lesson, the student should be able to:

✓ Define remuneration
✓ Explain economic basis of remuneration
✓ Illustrate the impact of government influence
✓ Explain the safeguards to minimize mistakes in compensation

COURSE MATERIALS:

Remuneration is any type of compensation or payment that an individual or employee receives

as payment for their services or the work that they do for an organization or company.

Remuneration is payment or compensation received for services or employment. This includes

a base salary and any bonuses or other economic benefits that an employee or executive receives
during employment.

The amount of remuneration and the form it takes is dependent on many factors, including:

• The employee's value to the company—whether the person is full-time vs. part- time,
holds an executive position vs. entry-level, etc.
• The job type—whether it is salaried vs. hourly pay, whether the earnings are commission
vs. base pay, tipped positions, etc.
• The company's business model—some companies offer bonuses or employee stock
options while others do not.

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Factors Influencing Employee Remuneration

• Labor Market. Demand for and supply of labor influence wage and salary fixation.
• Cost of Living. Next in importance to labor market is the cost of living. ...
• Labor Unions
• Labor Laws
• Society
• The Economy
• Business Strategy
• Job Evaluation and Performance Appraisal.

An effective compensation program can help you attract, motivate, and retain top talent. To
achieve these goals, your program should be fair, competitive, and performance driven. The
following are some mistakes to avoid when designing and implementing a compensation program:

❖ Failing to consider total compensation.

Even if your company is unable to offer the highest wages, it can still offer a competitive total
compensation package. Total compensation includes both direct compensation (wages, salaries,
commissions, and bonuses) and indirect compensation (health insurance, paid time off, retirement
plans, etc.). Employers should decide on a total compensation mix that balances attracting and
retaining top talent with keeping labor costs under control.

❖ Nonexistent or inaccurate job descriptions.

Accurate, up-to-date job descriptions help establish the foundation of an effective compensation
program. Job descriptions define the main purpose of a job, the essential and nonessential
responsibilities, necessary qualifications, and other pertinent information related to the role. You
can use job descriptions to help value the position and compare jobs within the company and in
the external market.

❖ Neglecting the market .

To be competitive, understand how your compensation plan compares with other companies in
the market. Review salary surveys to determine what other companies similar in size, industry and
location are paying their employees. While salary surveys are available for purchase, the
U.S. Bureau of Labor Statistics makes its wage data available for free.

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 ❖ Disregarding internal inequity.

Consider internal equity when making pay decisions. Employees should feel they are
compensated fairly relative to other employees within your company. If employees believe their
jobs pay less than comparable positions, companies may struggle with lower employee
engagement, higher turnover, and potential legal claims. To help promote internal equity, establish
a pay structure that is based on objective criteria.

❖ Weak connection to performance.

Merit raises and bonuses are often tied, at least in part, to individual performance. Without a strong
link between performance and pay, employees may see raises and bonuses as entitlements or
view your payout system as arbitrary. Set clear performance goals and conduct regular
performance reviews to help you make informed pay decisions.

❖ Failing to communicate .
Let employees know how your compensation plan works at the time of hire and throughout the
employment relationship. For example, some employers provide employees with an annual total
compensation statement that lists the direct and indirect compensation the company provided to
the employee over the year. This can be a powerful motivation and retention tool.

❖ Prohibiting pay discussions .

Under Section 7 of the National Labor Relations Act (NLRA), employees have, among other things,
the right to act together, with or without a union, to improve wages and working conditions. The
National Labor Relations Board, which enforces the NLRA, has taken the position that workplace
rules or policies that could be construed as prohibiting employees from discussing their wages,
benefits and other terms and conditions of employment could violate Section 7. Accordingly,
employers should not prohibit employees from discussing pay or mandate the confidentiality of
wages, benefits or other terms and conditions of employment.

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 ❖ Violating pay laws .
Review applicable federal, state, and local laws that govern compensation, including minimum
wage, overtime, pay deductions, final pay, and pay equity. Understanding the laws that apply to
your business and taking steps to ensure compensation plans are compliant can help avoid
penalties for violating pay laws.

SIGNIFICANCE OF REMUNERATION

Remuneration provides basic attraction to a employee to perform job efficiently and effectively.
Remuneration leads to employee motivation. Salaries constitutes an important source of income
for employees and determine their standard of living. Salaries effect the employees productivity
and work performance.

Following are some of the points which highlight the significance of personnel
remuneration:

✓ Wages/ salaries constitute the primary source of income to employees. Their adequacy
or otherwise would very much determine their standard of living.

Adequate remuneration is a source of motivation to employees. It makes them committed and loyal
to the organization; and paves way for excellent industrial relations.

Through making adequate and timely payment of employee remuneration, an employer can attract
and retain good personnel to and in the organization. This helps to ensure a stability of labor force
– bringing several valuable advantages in the its wake for the organization.

Specially, in labor-intensive industries, wages constitute a substantial part of the cost of

production. As such wage payments affects the cost and price-structures of an industrial
enterprise. Prices of goods and services, in turn, have social implications; as these directly
affect the purchasing power of money held by the society.

Financial compensation refers to the act of providing a person with money or other things of
economic value in exchange for their goods, labor, or to provide for the costs of injuries that they
have incurred.

Direct financial compensation includes direct payment of money to employees, such as salaries,
wages, commissions and bonuses. Indirect financial compensation is non-cash benefits, such
as medical insurance, retirements and employee services.

The four types of compensation:

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The Four Major Types of Direct Compensation: Hourly, Salary, Commission, Bonuses. When
asking about compensation, most people want to know about direct compensation, particularly
base pay and variable pay. The four major types of direct compensation are hourly wages, salary,
commission and bonuses.

Assessment: Essay.

1. Define remuneration
2. Discuss the economic basis for remuneration
3. Explain the impact of government influence to compensation
4. Explain how to avoid mistakes in compensation administration.

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 LESSON 2
Financial Compensation

Overview

Financial compensation refers to the act of providing a person with money or other things of
economic value in exchange for their goods, labor, or to provide for the costs of injuries that they
have incurred.

Indirect financial compensation includes all monies paid out to an employee that are not
included in direct compensation. Non-financial incentives are the types of rewards that are not
a part of an employee's pay.

Learning Outcomes: At the end of the lesson, the student should be able to:

✓ Explain government statutes effects on financial compensation

✓ Illustrate the procedure of collective bargaining
✓ Define job evaluation program.

COURSE MATERIALS:

REPUBLIC ACT NO.772

REPUBLIC ACT NO. 772 - AN ACT TO FURTHER AMEND ACT NUMBERED THREE
THOUSAND FOUR HUNDRED AND TWENTY-EIGHT, "AN ACT PRESCRIBING THE
COMPENSATION TO BE RECEIVED BY EMPLOYEES FOR PERSONAL INJURIES, DEATH
OR ILLNESS CONTRACTED IN THE PERFORMANCE OF THEIR DUTIES", AS AMENDED BY
ACT NUMBERED THREE THOUSAND EIGHT HUNDRED AND TWELVE AND BY
COMMONWEALTH ACT NUMBERED TWO HUNDRED AND TEN PROVIDING FOR ITS
ADMINISTRATION BY A WORKMEN'S COMPENSATION COMMISSIONER; AND
PRESCRIBING HIS POWERS AND DUTIES

Section 1. Section two of Act Numbered Three thousand four hundred and twenty-eight as
amended by section one of Act Numbered Three thousand eight hundred and twelve is hereby
further amended to read as follows:

"Sec. 2. Grounds for compensation. — When an employee suffers personal injury from any
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accident arising out of and in the course of his employment, or contracts tuberculosis or other
illness directly caused by such employment, or either aggravated by or the result of the nature of
such employment, his employer shall pay compensation in the sums and to the person hereinafter
specified. The right to compensation as provided in this Act shall not be defeated or impaired on
the ground that the death, injury or disease was due to the negligence of a fellow servant or
employee, without prejudice to the right of the employer to proceed against the negligent party."

Sec. 2. Section three of Act Numbered Three thousand four hundred and twenty- eight
as amended by section two of Act Numbered Three thousand eight hundred and twelve
is hereby further amended to read as follows:

"Sec. 3. Applicable to Government. — This Act shall also be applicable to mounted

messengers in the service of the National Government and all its political subdivisions
and to the employees and laborers employed in public works and in
the industrial concerns of the Government and to all other persons performing manual
labor in the service of the National Government and its political subdivisions and
instrumentalities: Provided, however, That laborers and employees insured with the
Government Service Insurance System, and their dependents when entitled to the
benefits of the said Insurance System shall, in addition to the same be entitled to the
benefits granted by this Act."

Sec. 3. Section four of Act Numbered Three thousand four hundred and twenty-

eight is hereby amended to read as follows:

"Sec. 4. Injuries not covered. — Compensation shall not be allowed for injuries caused:
(1) by the voluntary intent of the employee to inflict such injury upon himself or another
person; (2) by drunkenness on the part of the laborer who had the accident; and (3) by
notorious negligence of the same."

Sec. 4. A new section, four-A, is added to Act Numbered Three thousand four
hundred and twenty-eight, to read:

"Sec. 4-A. Right to additional compensation. — In case of the employee's death, injury
or sickness due to the failure of the employer to comply with any law, or with any order,
rule or regulation of the Workmen's Compensation Commissioner or the Industrial
Safety Bureau, or should the employer violate the provisions of Act Numbered Three
thousand seventy-one or fail to install and maintain safety appliances, or take other
precautions for the prevention of accident or occupational disease, he shall be liable to
pay an additional compensation equal to fifty per centum of the compensation fixed in
this Act."

Sec. 5. Section five of Act Numbered Three thousand four hundred and twenty- eight
is hereby amended to read as follows:

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"Sec. 5. Exclusive right to compensation. — The rights and remedies granted by this Act
to an employee by reason of a personal injury entitling him to compensation shall
exclude all other rights and remedies accruing to the employee, his personal
representatives, dependents or nearest of kin against the employer under the Civil
Code and other laws, because of said injury.

"Employers contracting laborers in the Philippine Islands for work outside the same
shall stipulate with such laborers that the remedies prescribed by this Act shall apply to
injuries received outside the Islands through accidents happening in and during the
performance of the duties of the employment. Such stipulation shall not prejudice the
right of the laborers to the benefits of the Workmen's Compensation Law of the place
where the accident occurs, should such law be more favorable to them."

Sec. 6. A new section, 7-A, is added to Act Numbered Three thousand four hundred and
twenty-eight, to read:

"Sec. 7-A. Workmen's Compensation Commissioner, appointment. — There is hereby

created in the Department of Labor the Office of the Workmen's

Compensation Commissioner, hereafter designated the Commissioner, who shall be

assisted by a Deputy Workmen's Compensation Commissioner. The Commissioner and
Deputy Commissioner shall be appointed by the President of the Philippines with the
consent of the Commission on Appointments and shall receive compensation at the rate
of eight thousand four hundred pesos and seven thousand and two hundred pesos per
annum, respectively.

"Upon the organization of the Office of the Commissioner the existing Workmen's
Compensation Division in the Bureau of Labor shall be abolished, and all its files,
records, equipment, appropriation, and all the officials and employees of said division
shall thereupon be placed under control and management of the Commissioner."

Sec. 7. Section eight of Act Numbered Three thousand four hundred and twenty- eight,
as amended by section four of Act Numbered Three thousand eight hundred and twelve
and by section two of Commonwealth Act Numbered Two hundred and ten, is hereby
amended further to read as follows:

"Sec. 8. Death benefit. — If the disease contracted or injury received by the employee
as provided in section two hereof causes his death within two years from the date of
such injury or sickness, the employer shall pay the compensation to the persons entitled
thereto, and in case there shall be none, he shall pay to the person representing the
deceased employee the burial expenses not to exceed two hundred pesos, and shall
also pay to or for the following persons, in the order of priority and during the periods
hereinafter set forth, a weekly compensation equivalent to the following percentages
of the average weekly wages of the employee, as
determined in section nineteen of this Act:

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"(a) To the dependent widow or widower, in case there are no dependent children,
forty-five per centum.

"(b) To the dependent widow or widower in case there are one or two dependent
children, fifty per centum, and if there are three or more dependent children, sixty
per centum. The compensation to the widow or widower and of the dependent children,
and the Workmen's Compensation Commissioner may from time to time adjust the
compensation between them in the most equitable manner possible.

"(c) If there is no dependent widow or widower, but a dependent child or children, such
child or children shall be paid forty per centum, with ten per centum additional for each
child in excess of two, up to a maximum of fifty per centum, which shall be distributed
in equal shares among the children if there be more than one.

"(d) If there are no dependent widow, widower or children, but there is a dependent
father and mother, forty per centum to the father or mother if totally dependent, or
twenty-five per centum if partly dependent, and if both parents are dependent, each
shall be paid one-half of such compensation. If there is no parent, but dependent
grandparents, the same compensation shall be paid as to a father or
mother.

"(e) If there are no dependent widow, widower, child, parent, or grandparent, but there
is a dependent grandchild, brother or sister or two or more such, then twenty- five per
centum shall be paid for one dependent and five per centum additional for each
additional dependent, up to a maximum of forty per centum, which shall be distributed
share and share alike among the dependents if there be more
than one.

"(f) If there are no legal dependents, the employer shall pay the amount of one
thousand pesos to the Workmen's Compensation Fund: Provided, That the said
Commissioner shall have direct control and supervision over such funds, subject to
general auditing requirements, which shall be spent for the rehabilitation of crippled
men in industry.

"When several persons are entitled to compensation and there is disagreement

concerning the share of the compensation each should receive, the Workmen's
Compensation Commission shall act as referee and designate the share to be allotted
to each dependent.
Sec. 8. Section eleven of Act Numbered Three thousand four hundred and twenty- eight
is hereby amended to read as follows:

"Section 11. Scope of certain words. — The words "son", "daughter", or "children",
as used in this Act, shall include stepchildren, adopted children, and illegitimate children
acknowledged by and dependent upon the deceased before the injury was contracted;
but they shall not include married persons, unless the same be dependents, for any
reason provided for in law. The words "brother" or "sister" include stepbrothers or
stepsisters, half-brothers or half-sisters, and brothers or sisters by adoption; but it does
not include married brothers or married sisters, unless the same are dependents for
any reason provided for in law. The words "grandson",
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"granddaughter", or "grandchild" include children of adopted children and children of
stepchildren; but they do not include stepchildren of children, nor stepchildren of
stepchildren, nor stepchildren of adopted children, nor married grandchildren, unless
the same be dependents in accordance with the law.

The word "parents" includes stepfathers and stepmothers and parents by adoption. The
word "grandfathers", "grandmothers" or "grandparents" include the parents of parents
by adoption; but they do not include parents of step-parents, step-parents of
parents, nor step-parents of step-parents."

Sec. 9. Section twelve of Act Numbered Three thousand four hundred and twenty- eight
is hereby amended to read as follows:

"Section 12. Sundry provisions regarding death benefits. — In computing death

benefits, the average weekly wages of the deceased employee shall not be reckoned at
more than fifty pesos nor less that ten pesos; but the total weekly compensation shall
not in any case exceed the average weekly wages computed in accordance with section
nineteen of this Act, nor shall the compensation paid in any case exceed in its
aggregate the sum of four thousand pesos.

"The bona fide payment of a death compensation by an employer to a dependent

entitled thereto in the second place after another dependent or dependents shall
protect and exonerate the employer, unless and until the dependent or dependents
having priority right shall notify him of his or their claim.

"In the event of death occurring after a period of total or partial disability, the period of
disability shall be deducted from the respective total periods established in section ten
of this Act.

"The compensation of a demented person shall be paid to the guardian of such person."

Section 10. Section thirteen of Act Numbered Three thousand for hundred and twenty-
eight, as amended by section five of Act Numbered Three thousand eight hundred and
twelve and section three of Commonwealth Act Numbered Two hundred and ten, is
further amended to read as follows:

"Section 13. Medical attendance. — Immediately after an employee has suffered as

injury or contracted sickness and during the subsequent period of disability, the
employer shall provide the employee with such medical, surgical, and hospital services
and supplies as the nature of the injury or sickness may require.

"The pecuniary liability of the employer for the necessary medical, surgical, and hospital
services and supplies shall be limited to the amount ordinarily paid in the community
for such treatment of an injured person of the same standard of living if the treatment
had to be paid for by the injured person himself.

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 "In case the employer cannot furnish medical, surgical, and hospital services and
supplies promptly, the injured employee may acquire the same at the expense of the
employer.

"If it is shown before the Commissioner that the injured employee voluntarily refused
to accept the services of a competent physician or surgeon or voluntarily rejected the
medical, surgical, and hospital services and supplies provided, by the employer, or
voluntarily obstructed the physician or surgeon or the medical, surgical or hospital
services, such refusal on the part of the employee shall be construed as a waiver of
all or part of his rights to the medical, surgical, and hospital services paid for by the
employer, and in this case the employer shall be liable only for the injury or for the
disability of any nature that would have ensued if the injured man had accepted the
medical, surgical, and hospital services and supplies tendered by the employer:
Provided, however, That the refusal as well as the kind of disability that would have
been the result of the injury if the injured person had accepted such services, shall
be set forth in an affidavit made within twenty-four hours after such refusal by the
physician called to attend the injured person."

Section 11. Section fourteen of Act Numbered Three thousand four hundred and
twenty-eight, as amended by section four of Commonwealth Act Numbered Two
hundred and ten, is further amended to read as follows:

"Section 14. Total disability. — It case the injury or sickness causes total disability
for labor, the employer, during such disability but exclusive of the first three days shall
pay to the injured employee a weekly compensation equivalent to sixty per centum of
his average weekly wages; but not more than thirty-five pesos nor less than ten pesos
per week, except in the case provided for in the next following paragraph. Such weekly
payments shall in no case continue after the disability has ceased, nor shall they extend
over more than two hundred and eight weeks, nor shall the aggregate sum paid as
compensation exceed in any case four thousand pesos. But no award of permanent
disability shall take effect until after two weeks have elapsed from the date of injury.

"In the case of an employee whose average weekly wages are less than ten pesos
per week, the weekly compensation shall be the entire amount of such average weekly
wages; but if the disability is permanent, the compensation shall be ten pesos in such
case. In the event that the total disability, begins after a period of partial disability, the
latter shall be deducted from said total period of two hundred and eight weeks."

Section 12. Section sixteen of Act Numbered Three thousand four hundred and twenty-
eight, as amended by section six of Act Numbered Three thousand eight hundred and
twelve and by section five of Commonwealth Act Numbered Two hundred and ten, is
hereby further amended to read as follows:

"Section 16. Partial disability. — In case the injury or sickness causes partial disability
for labor, the employer, during such disability and except as hereinafter provided, shall
pay to the injured or sick employee for a period of not to exceed two hundred
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and eight weeks, beginning with the first day of disability, a weekly compensation equal
to fifty per centum of the difference between his average weekly wages before the
accident and the weekly wages which he could probably earn thereafter; but not more
than eighteen pesos per week. The weekly payments shall not in any case continue after
the disability has ceased, and in case partial disability sets in after a period a total
disability, such period of total disability, shall be deducted from the total period of
two hundred and eight weeks and the amount of the compensation paid shall not in
any case be in excess of the total sum of four thousand pesos. No award for disability
shall be made before, a lapse of two weeks counted from the date of the injury."

Section 13. Section eighteen of Act Numbered Three thousand four hundred and
twenty-eight is hereby amended to read as follows:

"Section 18. Amputation. — Amputation between elbow and wrist shall be considered
as equivalent to the loss of a hand. Amputation between knee and ankle shall be
considered as a loss of a foot. Amputation at or above the elbow shall be considered as
equivalent to the loss of an arm. Amputation at or above the knee shall be considered
as equivalent to the loss of a leg.
"Compensation for the injuries above specified shall exclude all other compensation
except the benefits provided for in sections thirteen, fourteen, and fifteen.

"In case of an injury producing a serious disfigurement of the face or head, the
Commissioner may, at the request of an interested party, determine and award such
compensation as may seem fair and proper in view of the nature of the disfigurement,
but which shall not exceed four thousand pesos.

"In all other cases of this kind of disability not mentioned in other sections of this Act,
the compensation shall be fifty per centum of the difference between the average
weekly wages of the injured person and his subsequent earning capacity in the same or
some other employment, payable while the partial disability lasts; but subject to
reconsideration of the degree of impairment by the Commissioner at the request of
an interested party: Provided, however, That the weekly payments shall in no case be
continued for a period longer than two hundred and eight weeks.

"The total compensation prescribed in this and the next preceding section and the total
compensation prescribed in sections fourteen and fifteen of this Act shall, together, not
exceed the sum of four thousand pesos: Provided, however, That after the payment has
been made for the period specified by the Act in each case, the Workmen's
Compensation Commissioner may from time to time cause the examination of the
condition of the disabled laborer, with a view to extending, if necessary, the period of
compensation which shall not, however, exceed the said amount of four thousand
pesos.

Section 14. Section twenty of Act Numbered Three thousand four hundred and twenty-
eight is hereby amended to read as follows:

"Sec. 20. Voluntary payments. — Payments made by the employer or insurer to the
injured laborer during the period of his disability or to his dependents, which under
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the provisions hereof were not due or payable when they were made, shall, upon being
duly established, by agreement between the parties concerned, a certified copy of
which shall be sent to the Workmen's Compensation Commissioner, or subject to the
decision of the Commissioner, be deducted from the sum to be paid as compensation:
Provided, That in case of disability, the deduction shall be made by reducing the period
of time during which the compensation is to be paid, and not by reducing the weekly
payment to be made in accordance with sections fourteen, fifteen, sixteen, and
seventeen of this Act."

Section 15. Section twenty-one of Act Numbered Three thousand four hundred and
twenty-eight is hereby amended to read as follows:

"Sec. 21. Periodical payments. — Upon agreement by the parties concerned, subject to
the approval of the Workmen's Compensation Commissioner, the compensation may
be paid monthly or semi-monthly instead of weekly."

Section 16. Section twenty-two of Act Numbered Three thousand four hundred and
twenty-eight as amended by section eight of Act Numbered Three thousand eight
hundred and twelve, is hereby further amended to read as follows:

"Sec. 22. Payments in a lump sum. — Whenever the Commissioner considers it most
advantageous and convenient, the liability of the employer as regards the
compensation may be discharged totally or in part by payment in a lump sum or
sums as may be the case, under the condition that if the sum or sums to be paid are less
than that fixed by the law, the reduction shall not be more than eight per centum:
Provided, however, That any agreement or contract made for this purpose between the
parties shall not be valid unless it be in conformity with the provisions of this section in
so far as the amount of compensation is concerned, and be made in the form of a public
document acknowledged before the justice of the peace of the locality and attested by
two witnesses, one of whom shall be the municipal treasurer or the person acting in his
stead if the agreement in entered into outside the City of Manila, subject to the approval
of the Workmen's Compensation Commissioner, and if in the City of Manila, before the
Workmen's Compensation Commissioner or any of his authorized representative.
Before the acknowledgment of the instrument, the justice of the peace shall fully inform
the injured laborer or dependent person or persons executing the instrument in his
stead, of all their rights and privileges under this Act reading and translating to them
into the vernacular dialect they know in case they do not understand English or Spanish,
the provisions of this Act establishing the amounts and period of compensation and
other privileges to which they are entitled by reason of the accident, and shall certify in
the acknowledgment clause that all these requisites have been complied with. The
expenses of the acknowledgment of the contract shall be borne by the employer.

"Any failure on the part of the employer to comply with his obligation to pay any of
the sums due to the injured laborer or his dependents in accordance with this Act, shall
entitle the beneficiary to claim the entire balance of the compensation at one time."

Section 17. Section twenty-nine of Act Numbered Three thousand four hundred and
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twenty-eight as amended by section nine of Act Numbered Three thousand eight
hundred and twelve is hereby further amended to read as follows:

"Sec. 29. Agreement on compensation. — In case the employer and injured laborer or
the dependents entitled to compensation arrive at an agreement concerning the
compensation provided for by this Act, such agreement in order to be valid, shall
provide, at least, the same amount of compensation as that prescribed by this Act
and must be approved by the Workmen's Compensation Commissioner, or any of his
authorized representatives: Provided, however, That the employer shall be exempt
from all liability under this Act as soon as the compensation has been paid in accordance
with this section, saving the provisions of section six of this Act."

Section 18. Section thirty-one of Act Numbered Three thousand four hundred and
twenty-eight as amended by section ten of Act Numbered Three thousand eight hundred
and twelve is hereby further amended to read as follows:

"Sec. 31. Intervention of the Workmen's Compensation Commissioner. — In case a

laborer who suffers an accident or contracts an illness comprised within the provisions
of section two of this Act, or his dependents, contracts the services of a lawyer or other
persons to help him or direct him in his claim for compensation against his employer
before the office of the Workmen's Compensation Commissioner, the fees of said
lawyer or person shall not be more than five per cent of the total sum which said injured
or sick laborer or his dependent in case of his death shall receive by way of
compensation; but if his services shall take place in an appealed case, his fees shall
not be in excess of ten per centum of said sum, and any person who, in violation of this
proviso, makes an excessive charge, shall be punished by a fine of not more than two
hundred pesos."

Section 19. Section thirty-two of Act Numbered Three thousand four hundred and
twenty-eight is hereby repealed.

Sec. 20. Section thirty-six of Act Numbered Three thousand four hundred and twenty-
eight is amended to read as follows:

"Sec. 36. Cooperation of other officials. — In connection with his duties, the Workmen's
Compensation Commissioner may, if necessary, require the cooperation of any city or
provincial fiscal, city or provincial health officer; any justice of the peace or any other
national, provincial or municipal official in order to secure proper compliance with this
Act or any part thereof."

Sec. 21. Section thirty-seven of Act Numbered Three thousand four hundred and
twenty-eight, as amended by section eleven of Act Numbered Three thousand eight
hundred and twelve, is hereby further amended to read as follows:

"Sec. 37. Notice of accidents by employer. — Each employer shall hereafter keep a
record of all injuries, whether fatal, or not, received by his employees in the course
of their employment, when the same come to his knowledge or attention. As soon as
possible after the occurrence of an injury resulting in absence from work for a day
or more, the employer shall give written notice thereof to the Workmen's Compensation
C o m m i s s i o n e r on blank forms specially prepared by said
Page 17 of 81
Commissioner for which the employer shall make requisition in due time, or in case
of necessity or emergency, or for lack of forms, on any other paper, containing the
information hereinafter prescribed.

"The notice shall set forth the style and nature of the business of the employer, the
location of the establishment, the name, age, sex, wages, and occupation of the injured
employee, the date and hour of the accident resulting in the injury, the nature and cause
of the injury, whether liability is admitted or controverted, and such other information
as may be required by the Workmen's Compensation Commissioner.
"Not later than sixty days after the termination of the disability of the injured employee,
the employer or other person liable for the payment of the compensation provided for
in this Act shall file with the Workmen's Compensation Commissioner a statement of
the total payments made or to be made for compensation and for medical
services to the injured person.

"Any employer refusing or neglecting to give the notice or information required by

this section shall be punished by a fine of not more than two hundred fifty pesos for each
offense: Provided, That in the case of firms or corporations, the president, directors or
managers thereof, shall be criminally liable for each violation, or in default thereof, the
person who directly or indirectly take their place in the management, direction or
administration of the business."

Sec. 22. Section thirty-nine of Act Numbered Three thousand four hundred and twenty-
eight, as amended by section thirteen of Act Numbered Three thousand eight hundred
and twelve and by section nine of Commonwealth Act Numbered Two hundred and ten,
is hereby amended further to read as follows:

"Sec. 39. Definition of various words. — In this Act, unless the context indicates
otherwise, the definition of various words used therein shall be as follows:

"(a) 'Employer' includes every person or association of persons, incorporated or not,

public or private, and the legal representative of the deceased employer. It includes the
owner or lessee of a factory or establishment or place of work or any other person who
is virtually the owner or manager of the business carried on in the establishment or
place of work but who, for the reason that there is an independent contractor in the
same, or for any other reason, is not the direct employer of
laborers employed there.

"(b) 'Laborer' is used as a synonym of 'Employee' and means every person who has
entered the employment of, or works under a service or apprenticeship contract for an
employer. It does not include a person whose employment is purely casual and is not
for the purposes of the occupation or business of the employer. Any reference to the
person dependent on him, as defined in this Act, if the context so requires, or, if the
employee is a minor or incapacitated, to his guardian or nearest of kin.

Page 18 of 81
"(c) 'Injury' or 'personal injuries' includes sickness, 'injury' or 'personal injuries' or
'sickness' includes death produced by the injury or sickness.

"(d) 'Industrial employment' in case of private employers includes all employment or

work at a trade, occupation or profession exercised by an employer for the purpose
of gain, except domestic service.

"(e) 'Public employment' signifies employment in the service of the National

Government of the government of any province, municipality or other political
subdivision of the Islands. It does not include employment as public officer elected
by the popular vote nor persons paid more than four thousand eight hundred pesos per
annum.

"(f) 'Partial disability', diminished capacity for securing employment due to

disfigurement produced by an injury, can be considered as partial disability.

"(g) 'Wages' includes the commercial value of the board and lodging, subsistence, fuel
and other amounts which the employee receives from the employer as part of his
compensation.

"(h) A word in the singular shall also imply to the plural and vice versa, and one in the
masculine gender shall also apply to the feminine."

Sec. 23. Section forty-two of Act Numbered Three thousand four hundred and twenty-
eight as amended by section fourteen of Act Numbered Three thousand eight hundred
and twelve is hereby amended further to read as follows:

"Sec. 42. Law applicable to small industries. — All claims for compensation by reason
of an accident in an enterprise, industry, or business carried on or in a trade,
occupation or profession exercised by an employer for the purpose of gain, whose
capital amounts to less than ten thousand pesos and is not hazardous or deleterious
to employees, shall be governed by the provisions of Act Numbered Eighteen hundred
and seventy-four and its amendments: Provided, however, That the following
enterprises or establishments shall be among those considered hazardous or
deleterious to employees:

"(1) Any business for the transportation of persons or goods, or both;

"(2) Any factory, establishment, or shop where machinery is used;

"(3) Any factory, establishment, or shop, or shop where the employee is exposed to
dust or other particles or matter, fumes, cases, and other chemical substances;

Page 19 of 81
"(4) Plants or establishments for the making or manufacture of fireworks, dynamite,
munitions, and similar things or articles;

"(5) Employment for circus, boxing, football, basketball, wrestling, racing, and similar
sports; and

"(6) Fishing, lumbering, and mining."

Sec. 24. Sections forty-three to fifty-five are hereby added to the Act to read as
follows:

"Sec. 43. Presumption. — In any proceeding for the enforcement of the claim for
compensation under this Act, it shall be presumed in the absence of substantial
evidence to the contrary —

"1. That the claim comes within the provisions of this Act;
"2. That sufficient notice thereof was given;

"3. That the injury was not occasioned by the willful intention of the injured employee
to bring about the injury or death of himself or of another;

"4. That the injury did not result solely from the intoxication of the injured employee
while on duty; and

"5. That the contents of verified medical and surgical reports introduced in evidence
by claimants for compensation are correct.

"Sec. 44. Compensation, how payable. — The compensation herein provided for shall
be paid periodically and promptly in like manner as wages, and as it accrues, and
directly to the persons entitled thereto without the necessity of a formal award by
the Commissioner, except in those cases in which the right to compensation is
controverted by the employer. If the employer or insurance carrier does not controvert
the injured workmen's right to compensation, such employer or insurance carrier shall,
either on or before the fourteenth day after disability or within five days after the
employer first has knowledge of the accident, begin paying compensation and shall
immediately notify the Commissioner in accordance with a form to be prescribed by
him, that the payment of compensation has begun, accompanied by the further
statement that the employer or insurance carrier, as the case may be, will notify the
Commissioner when the payment or compensation has been stopped, and immediately
upon the stoppage or suspension or payment of compensation the employer or
insurance carrier shall notify the Commissioner of such act on a form to be inscribed by
him. After the first payment of compensation has been made, subsequent payments
shall be made weekly thereafter; but the Commissioner may determine that any
payments may be made monthly or at any other period,
as he may deem advisable.

Page 20 of 81
"In case the employer decides to controvert the right to compensation, he shall, either
on or before the fourteenth day of disability or within ten days after he has knowledge
of the alleged accident, file a notice with the Commissioner, on a form prescribed by
him, that compensation is not being paid, giving the name of the claimant, name of the
employer, date of the accident and the reason why compensation is not being paid.
Failure on the part of the employer or the insurance carrier to comply with this
requirement shall constitute a renunciation of his right to controvert the claim unless
he submits reasonable grounds for the failure to make the necessary reports, on the
basis of which grounds the Commissioner may reinstate his right to
controvert the claim.

"Whenever for any reason compensation payments cease, the employer or his
insurance carrier shall, within sixteen days thereafter, send to the Commissioner a
notice on a form prescribed by the Commissioner that such payment has been stopped.
Such notice shall contain the name of the injured employee or his principal dependent,
the date of the accident, the date up to which compensation paid. In case the employer
or his insurance carrier fails so to notify the Commissioner of the
cessation of payments within twelve days after the date on which compensation has
been paid, the Commissioner may, after a hearing, fine such employer or his insurance
carrier in an amount not exceeding one hundred pesos, which shall be paid into the
Workmen's Compensation Administration Fund. Such penalty shall be collected in like
manner as an award of compensation. Whenever the Commissioner shall deem it
advisable, he may require any employer or insurance carrier to make a deposit with the
Commissioner to secure prompt and convenient payment of such compensation, from
which deposit may be deducted such fine as shall be imposed by
the Commissioner.

"All awards of compensation required to be made to minor under this Act shall be
paid to or for the benefit of such minors under such rules as may be adopted by the
Commissioner. Where such awards exceed four hundred pesos, the Commissioner
may, in his discretion, require the appointment of a guardian before making payment.
The Commissioner may also require a guardian to submit to him reports on the use
of money paid to minors.

"Sec. 46. Jurisdiction. — The Workmen's Compensation Commissioner shall have

exclusive jurisdiction to hear and decide claims for compensation under the Workmen's
Compensation Act, subject to appeal to the Supreme Court, in the same manner and in
the same period as provided by law and by Rules of Court for appeal from the Court
of Industrial Relations to the Supreme Court.

"Sec. 47. General powers and duties. — The Commissioner shall have full power and
authority:

"(a) To take charge of the administration of the Workmen's Compensation Act.

"(b) To hear and determine all claims for compensation under this Act in the manner
herein provided; to require and order medical service for injured employees as provided
herein; to approve and fix attorney's fees and claims for medical services; to excuse
failure to give notice either of injury, sickness or death of an employee; to
Page 21 of 81
approve agreements, make, modify or rescind awards, and make findings of fact and
rulings of law; to determine the time for payment of compensation and order
reimbursements of employers for amounts advanced; to assess penalties, compute
awards, and compromise actions for the collection of awards; to require and order
physical examinations of injured employees; and to exercise such other powers as may
be necessary to carry out the purposes of this Act. For every agreement approved, a fee
of one peso for every hundred pesos of the entire amount of compensation to be paid
shall be collected from the employer for administration costs: Provided however, That
none of these amounts shall be charged against the compensation due the employee.
The Commissioner shall have a seal for the authentication of his orders, awards,
and proceedings.

"(c) To make, amend, and rescind, subject to the approval of the Secretary of Labor,
such rules and regulations as may be necessary to carry out the purposes of this Act

"(d) To appoint, employ and maintain, subject to existing civil service rules and
regulations, such referees, agents, physicians, nurses, lawyers, accountants,
actuarians, inspectors, and such other technicians and clerical personnel as may be
necessary to carry out the purposes of this Act, or to perform the duties and exercise
the powers conferred by law upon the Commissioner.

"Sec. 48. Referees — Duties and powers. — A referee shall devote his entire time to the
duties of his office and shall receive compensation of not less than three thousand six
hundred pesos per annum. It shall be the duty of a referee, under the rules and
regulations of the Commissioner, to hear and determine claims for workmen's
compensation, to conduct such hearings and investigations and to make such orders,
decisions, rules and determinations as may be required by any order of the
Commissioner.

"Sec. 49. Procedure. — Any dispute or controversy concerning compensation under

this Act shall be submitted to the Commissioner as provided herein.

"Hearing shall be held by the Commissioner upon his own motion or upon the
application of any party interested therein. He shall cause reasonable notice of such
hearing to be given to each party interested, in service upon him personally or mailing
a copy thereof to him at his last known post office address. Such hearing may be
adjourned from time to time in the discretion of the Commissioner and may be heard at
such place or places as he shall designate. All parties in interest shall have the right
to represent at any hearing in person or by counsel or by any other agent or
representative, to present such testimony as may be pertinent to the controversy
before the Commissioner and to cross-examine the witnesses against them. The
Commissioner may receives as evidence and use as proof of any fact in dispute the
following matters, in addition to sworn testimony presented at open hearing:

"1. Reports of attending examining physician.

"2. Reports of investigators appointed by the Commissioner.

Page 22 of 81
"3. Reports of the employer, including copies of time sheets, book accounts or other
records.

"4.Hospital records in relation to the case.

"The Commissioner may also cause an examination to be made of the person of the
injured laborer, or without notice take testimony or inspect the premises where the
injury occurred. All ex parte evidence received by the Commissioner shall be reduced
to writing and any party in interest shall have the opportunity to examine and
rebut the same by further evidence.

"Hearing arising under this Act may be held before the Commissioner or any of the
referees.
"Any party in interest who is dissatisfied with the order entered by the referee may
petition to review the same and the referee may re-open said case, or may amend
or modify said order, and such amended or modified order shall be a final award unless
objection be made thereto by petition for review. In case said referee does not
amend or modify said order, he shall refer the entire case to the Commissioner, who
shall thereupon review the entire record in said case, and, in his discretion, may take or
order the taking of additional testimony, and shall make his findings of facts and enter
his award thereon. The award of the Commissioner shall be final unless a petition to
review same shall be filed by an interested party. Every petition for review shall be in
writing and shall specify in detail the particular errors and objections. Such petition
must be filed within fifteen days after the entry of any referee's order or award of the
Commissioner unless further time is granted by the referee or the Commissioner within
said fifteen days. All parties in interest shall be given due notice of the entry of any
referee's order or any award of the Commissioner, and said period of fifteen days shall
begin to run only after such notice, and the mailing of a copy of said order or award
addressed to the last known address of any in interest shall be
sufficient notice.

"The Commissioner, or any agent, deputy or referee designated by him shall have
power and authority to issue subpoenas, to compel the attendance of witnesses or
parties, and the production of books, papers or records, and to administer oaths.

"The Commissioner may, in his discretion, assess the cost of attendance and mileage of
witnesses subpoenaed by either party to any proceeding, against the other party to
such proceeding, when in his judgment the necessity of subpoenaing such witness
arises out of the raising of any incompetent, irrelevant or sham issue by such
other party.

"A full and complete record shall be kept of all proceedings had before the
Commissioner, his deputy or any referee on any hearing and all testimony shall be
taken down and transcribed by a stenographer appointed by the Commissioner.

"A transcribed copy of the evidence and proceedings, or any specific part thereof, of any
investigation or hearing taken by a stenographer appointed by the Commissioner,
Page 23 of 81
being certified by such stenographer to be a true and correct transcript of the
testimony on the investigation of hearing of a particular witness, or of a specific part
thereof, carefully compared by him from his original notes, and to be a correct
statement of evidence and proceedings had on such investigation or hearing so
purporting to be taken and subscribed, may be received as evidence by the
Commissioner and by any court with the same effect as if such stenographer were
present and testified to the facts so certified. Copy of such transcript shall be
furnished on demand to any party upon the payment of fifty centavos per folio to the
stenographer so furnishing such transcript.

"Sec. 50. Decision. — After the hearing of a case by the Commissioner, his deputy
or any of the referees, the same shall be decided according to its merits and the decision
be promulgated and signed by the Commissioner or his deputy. Fifteen
(15) days after the promulgation of the decision the same shall become final unless
previously appealed.

"Sec. 51. Enforcement of award. — Any party in interest may file in any court of record
in the jurisdiction of which the accident occurred a certified copy of a decision of any
referee or the Commissioner, from which no petition for review or appeal has been
taken within the time allowed therefor, as the case may be, or a certified copy of a
memorandum of agreement duly approved by the Commissioner, whereupon the Court
shall render a decree or judgment in accordance therewith and notify
the parties thereof.

"The decree or judgment shall have the same effect, and all proceedings in relation
thereto shall thereafter be the same as though the decree or judgment had been
rendered in a suit duly heard and tried by the Court, except that there shall be no appeal
therefrom.

"The Commissioner shall, upon application by the proper party or the Court before
which such action is instituted, issue a certification that no petition for review or appeal
within the time prescribed by section forty-nine hereof has been taken by the
respondent.

"Sec. 52. Appropriation. — The sum of two hundred ninety-eight thousand pesos not
otherwise appropriated is hereby set aside for the proper enforcement of this Act:
Provided, however, That monies paid into the Workmen's Compensation Fund shall
be made immediately available to defray the expenses for the enforcement of this
Act as provided in section fifty-five thereof.

"Sec. 53. Deposits of governments entities to guarantee payment of compensation.

— The National, provincial and municipal governments, as well as government-owned
or controlled corporations employing laborers and employees comprised within the
provisions of this Act, shall deposit with the office of the Workmen's Compensation

Commissioner an amount to be determined by said Commissioner to guarantee

payment of compensation. The said deposits shall be received by the Commissioner and
disbursed, thru the authority of the Commissioner or his deputy, as compensation

Page 24 of 81
payments to injured laborers of the government entities making the contribution or
the laborers' dependents in cases of death whenever the said laborers or their
dependents are entitled to compensation under the provisions of
this Act.

"Sec. 54. Contribution of insurance carriers. — The Commissioner shall also be

authorized to collect from insurance carriers one per centum of their gross receipts
on premiums collected from insurance of workmen's compensation liabilities to cover
administration costs: Provided, however, That nothing contained in this Act shall
prevent the Government from requiring employees from obtaining insurance policies
from the Government for the purposes of this Act.

"Sec. 55. Expenses of administration. — There is hereby created a special fund to be

known as the Workmen's Compensation Fund, which shall be under the custody and
control exclusively for the payment of the expenses of the administration of this
Act. All monies collected under section forty-four and under paragraph (4) of section
forty- seven and under section fifty-six of this Act shall be paid into said fund: Provided,
however, That the expenses of the Workmen's Compensation Commission shall be
included in the annual budget of the Department of Labor: And provided, further, That
the surplus amounts of the Workmen's Compensation Fund shall revert to the general
funds of the National Treasury.

"For every final decision awarding compensation, the uninsured employer or insurance
carrier against whom the decision is made shall pay into the Fund the sum of one peso
and an additional charge of one peso for every one hundred pesos of the entire
amount of compensation to be paid.

"For every adjourned hearing, and for every decision of a referee affirmed by the
Commissioner on review, the uninsured employer or insurance carrier making the
request for adjournment or seeking such review shall pay into the Fund the sum of five
pesos.

"If the monies in the Fund are not sufficient to cover the expenses of administration
in any fiscal year, the Commissioner shall determine as soon as possible the amount of
the deficiency. The Commissioner shall then assess upon and collect from each
insurance carrier and each uninsured employer where capital exceeds ten thousand
pesos the proportion of such deficiency that the total compensation or payments made
by such uninsured employer or insurance carrier bore to the total compensation or
payments made by all uninsured employers and insurance carriers. The amounts so
collected shall be used to reimburse the National Treasury for the appropriations
therefor made by the Government for the payment in the first instance of
the expenses for administering this Act.

"There is hereby created a committee composed of Workmen's Compensation

Commissioner as chairman two representatives of insurance carriers who shall be
appointed by the Secretary of Labor upon recommendation of the uninsured employers
and insurance carriers, which shall have the duty of advising the Workmen's
Compensation Commissioner in carrying out the purposes of this section."

Page 25 of 81
Sec. 25. This Act shall take effect upon its approval.

Approved: June 20, 1952

Procedure of Collective Bargaining

Collective bargaining is the process in which working people, through their unions, negotiate
contracts with their employers to determine their terms of employment, including pay, benefits,
hours, leave, job health and safety policies, ways to balance work and family, and more. Collective
bargaining is a way to solve workplace problems. It is also the best means for raising wages which
was first popularized in America but now is widely practiced here in the Philippines. Indeed,
through collective bargaining, working people in unions have higher wages, better benefits and
safer workplaces.

What are the steps involved in collective bargaining?

Thus, in a collective bargaining process, various steps involved are as follows:

❖ Preparation for negotiation.

❖ Issues for bargaining.
❖ Negotiation.
❖ Negotiated agreement.
❖ Ratification of agreement.
❖ Implementation of agreement.

How to Prepare for Collective Negotiations With a Union

Step 1: Form and Train the Negotiating Team on its Legal Obligations.
Step 2: Review Experience During the Life of the Last CBA.
Step 3: Review Previous Negotiations.
Step 4: Take the Unit's Composition into Account.
Step 5: Prepare a Wage and Benefit Analysis.
Step 6: Develop Objectives and Proposals.

What are the disadvantages of collective bargaining?

▪ The position taken by a union may not line up with the viewpoints of its members. It only
benefits workers who belong to a union. ...
▪ It can be a financial burden. ...
▪ It can affect relationships between members. ...
▪ It allows employees to hold strikes.

Page 26 of 81
Job Evaluation Program

The analytical job evaluation involves identifying key elements -- also known as factors -- of a
job, such as skill, mental and educational requirements, physical requirements and working
conditions. You must rank each job under each factor and assign points based on the relative
importance of each job.

Steps in Job Evaluation

1. Selection of Common Factors

In order to measure one job in terms of other jobs or with reference to other jobs, it is necessary to
select factors common to all occupations. Even though Occupations vary in duties, operations,
routine, equipment and materials, the basic nature of all jobs can be expressed in terms of
attributes such as skill, efforts, responsibility etc.
By breaking down each job into factors, required number of attributes can be ascertained. These
factors should also be classified into two namely, major factors and minor factors. This is because
all the factors contained in a single job are not of equal importance.

2. Defining the Factors

To ensure proper understanding of the job, the factors of a job should be properly defined. This is
the duty of the job analyst to stipulate the limits of each factor. A clear-cut definition enables the
worker to understand the relative weight of each factor. This will avoid overlapping.

3. Selection of a Suitable Method

Finally, the analyst should select a suitable method for job evaluation. There are four methods
of job evaluation. They are:
1. Job Evaluation by Ranking Method.
2. Job Evaluation by Classification Method.
3. Job Evaluation by Point Method.
4. Job Evaluation by Factor Comparison Method.

Difference between direct and indirect compensation

By definition, compensation can be understood as total amount of the monetary and non-
monetary reimbursement provided to an individual in return for labour. Within this act of repayment,
are three general varieties of compensation including direct, indirect and non- financial.
Direct financial compensation is most widely known and recognized form of compensation. Most
sought after by workers, direct compensation is the money which is paid directly to employees in
exchange for their labor. This includes everything from hourly wages, to set salaries, bonuses, tips
and commissions.
Indirect financial compensation includes all monies paid out to an employee that are not
included in direct compensation. This form of compensation is often understood as the portion of
an employee’s contract that covers items such as temporary leaves of absence, benefits and
retirement plans.
Non-monetary compensation differs from direct and indirect pay as it is has no monetary value.

Page 27 of 81
Non-financial incentives are the types of rewards that are not a part of an employee’s pay. Non-
monetary incentives are typically effective for employees who are comfortable with their salaries
or have been in the position for a long time. Compensation if this nature can include: Achievement
awards, team leadership opportunities, personal days, prizes, paid training, gift cards, new office
or workspace upgrade or even paid parking or transit passes.

Assessments:

1, Explain government statutes effects on financial compensation.

2. Discuss the procedure of collective bargaining.
3. Define job evaluation program.

Assignment: Case Study

Consumers Punish Firms that Cut Employee Pay in Response to COVID-19
by Bhavya Mohan, Serena Hagerty, and Michael Norton

In the wake of COVID-19, firms announced both employee furloughs and (typically small) CEO
wage cuts. This research shows that firms’ treatment of employees matters far more to consumers
than executive pay cuts.

Required: Write your short reaction on the above case.

Page 28 of 81
 LESSON 3
Non-Financial Incentives

Overview

Many organizations offer different types of employee services to attract and retain employees.
These services provide assistance to employees in a variety of ways to improve their work and
personal life. Along with standard fringe benefits such as health care and paid time off, many
employers are creating more ways to keep employees satisfied. Many of these services can be
implemented in small businesses at low costs.

Learning Outcomes:

At the end of the lesson, the student should be able to:

✓ Define and explain the types of financial compensation.
✓ Enumerate and illustrate the types of non financial compensation.

COURSE MATERIALS

Types of Financial Compensation

❖ There are six basic forms of compensation: salary, short-term incentives (STIs or bonuses),
long-term incentive plans (LTIPs), benefits, paid expenses, and insurance.
❖ Short-term incentives are usually formula-driven, whereas bonuses are awarded after- the-
fact and are usually discretionary.

❖ Wages are given to workers whereas salaries are given to employees. They are both
affected by market forces, as well as other factors, such as tradition, social structure, or
government regulation (e.g., minimum wage laws).
❖ Executive pay is usually a mixture of these different forms of compensation, with a salary,
bonuses, benefits and expenses, and shares or call options on company stock.

❖ Salaries are often seen as part of a "total rewards" system that includes benefits and
perquisites.
❖ Employee stock options (ESOs) are sometimes offered to management, with the
objective of giving them an incentive to behave in a way that boosts the company's stock
price.

Page 29 of 81
Types of Non-financial Incentives

Most types of non-financial incentives fall into four buckets: recognition, reward, opportunity, and
flexibility. Consider the following list of ideas for new ways to validate and engage in lieu of a pay
increase or bonus.

Recognition Reward Opportunity Flexibility

Award Vouchers Change to Paid personal
presentation in lead teams days
front of peers and tasks
Dinner with Prizes Paid Training Flexible
CEO Scheduling
Enhanced Gift Cards Promotion Telecommuting
decision options
making
New office Paid parking Mentorship Ability to stop
work space or transit Program working on
pass upgraded least
favorite task

RE CREATIO NAL ACTIVI TIES FOR EMPLOYEES

W H I C H C O M P A N I E S H A V E T H E B E S T R E C R E A T I O N A L F A C I L I T I E S?
Microsoft

Microsoft is a large company with offices all over the world. Its employees have access to gyms or
have a free spa or sports fields right there at the office. They also have many restaurants for their
employees to lead a healthier lifestyle. That’s not all, Microsoft also has a “Microsoft Living
Wellness Health Center” and even by its name, you can guess what the perks are. Employees
get access to flu shots, examinations, nutrition, and diet counsel and many more things.

Google

If you haven’t seen the movie The Internship, then you don’t know what kinds of things you can
see at Google’s headquarters in Silicon Valley. To put it short, they have everything from gyms
and free fitness classes to massages on campus. They also provide you with the possibility of
eating all three meals on site. A great addition to their workspace are their so-called “nap pods”
which play soothing music and help employees take naps. A 20-minute nap can increase your
alertness and increase productivity and is not dangerous for the body like a caffeine overdose.

Nike

A sports brand should be taking care of their workers with recreational activities and health benefits
but Nike goes over the top. An entire Olympic size swimming pool is available to workers, along
with many gyms and access to many fitness centers. Add to that tracks and running trails and you
have access to a complete workout right there at work.

Rodale – Men’s and Women’s Health Publisher

This company is behind the two popular and detailed magazines on men’s and women’s health. Their
headquarters have a gym and they offer fitness classes to their employees. They have a bar with organic
snacks and food, both local. A running track provides employees with cardio workout possibilities and a
meditation room to relax after a stressful period. Another relaxing
activity is gardening, available to Rodale’s employees.

If you ever think that you require more perks and benefits from your company, then you should
consider any of these on the list. Two things are certain and those are that you will not go hungry
and that you will always have the possibility of working out. Depending on your career of choice,
you can definitely have quite a number of recreational activities at work.

Some employees are particularly attracted to companies that offer social and recreational
activities.
...
Company Recreation Activities

o Company picnics.
o Fishing.
o Boating.
o Skiing.
o Golf Tournaments.
o After work parties at the end of a week or near holidays.

Company newsletters include periodic updates, news, promotions and events communicated in
print or electronic form. While newsletters are useful in getting attention from prospects, their
primary importance is in maintaining ongoing connections with contacts and existing customers.
Companies send newsletters weekly, monthly or quarterly, depending on their goals and business
activities.

Benefits

A core benefit of a company newsletter is to keep your brand in front of customers who buy
infrequently. A home inspector might send monthly newsletters with do-it-yourself or home
weatherizing tips to homeowners he has worked with. While he may not get immediate business
from many of them, his name remains in the minds of clients who also may forward the newsletter
to friends. This provides a word-of-mouth or referral marketing bonus. Many companies have
shifted from print mailings to electronic, which greatly reduce the costs of regular newsletters.

What should be included in a company newsletter?

▪ Include business updates.
▪ Share employee news.
▪ Report industry trends.
▪ Provide links to the latest company blog posts.
▪ Announce upcoming events.
▪ Promote new customer stories or case studies

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Workplace reward systems are incentive programs that encourage employee
engagement and productivity by offering bonuses, increased pay, additional
time off or other awards for a job well done. Reward systems recognize staff
members who excel in areas such as customer service, loyalty and sales ability.

Types of Employee Recognition and Rewards

▪ Bonuses. There are many types of bonuses, ranging from small to large. ...
▪ Written praise. Writing thank-you notes can not only show
appreciation, but is tangible proof of an employee's contributions. ...
▪ Verbal praise. ...
▪ Employee's first day. ...
▪ Birthdays. ...
▪ Employee Appreciation Day. ...
▪ Work anniversaries. ...
▪ Project completion.

Medical Services

Occupational health services are there to support people in the workplace,

to help to ensure that workplaces are safe and healthy and to address health
problems when they arise
.......................................................................................................................................
Many
large organisations have their own occupational health service, or buy in
services from provider companies.
Canteen Services

As per the requirement of Factories Act, 1948 for an industry having more
than 250 employees, canteen facility shall be provided. To comply with the
statutory requirements, the company provided food to the employees and cash
is recovered from their salary.

Assessment:

1. Define and explain the types of financial compensation.

2. Enumerate and illustrate the types of non financial compensation.

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