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Group 9Remgrant AbadPaul Regyll AlbaEarvin Andaya

Formulating a Company Compensation Policy

A company must formulate a sound company compensation policy on which basis the nature , and frequency of administration of its cash, near-cash compensation, and benefits would be strategically positioned, developed, and reviewed.

Dimension of a Compensation Philosophy Pay for performance

Many companies have some kind of “pay for performance” compensation policy. As one company would say, : We reward outstanding performance with outstanding pay.”

Market competetiveness

This can be seen through the manner by which a company approaches its market: market rates will be expressed in terms of total compensation whenever possible.

Degree in which employees are engaged in the success of a company

Communication link to corporate performance

Total Compensation

A simplistic of viewing compensation is through this equation

A + B + D + E

A. Guaranteed cashRegular salaryFixed and guaranteed allowanceFixed/guaranteed bonuses(13th month pay)

B. Variable or discretionary compensation(e.g. commission, profit share, performance

bonus, management incentive)

C. Total Cash (A+B)

D. Benefits

E. Total remuneration (C+D)

Basic Salary

Regular salary = basic salary + fixed and guaranteed allowance

Guaranteed cash = regular salary + fixed and guaranteed bonuses

Total cash = guaranteed cash + variable or discretionary compensation

Basic salary is adjusted through various methods including:

1. Merit Increase2. Promotion

Variable Compensation

There are various forms of variable compensation. The amount of variable compensation depends on results of pre-established targets. It is good to remember not only the obvious factor that this is potentially additional income to the employee but that it is also compensation at risk. Some are individual variable compensation, others are team-based, and still others are company wide

Sales incentive Plans

Sales employees are almost always provided a compensation package with a variable compensation component.

Management Incentive Plans

Management incentives that provide variable compensation are effective tools in shaping and directing behaviors to support company objectives. While not everything rests on the incentive plan, it still serves as an effective tool.

Benefits Social Security

The Social Security System of the Philippines, created by Republic Act No. 1161, as amended, was established on September 1, 1957. Its purpose is to render assistance to workers and families in case the source of their income is terminated, reduced, or interrupted because of sickness, disability, death or old age.

Health Insurance/ Health PlanA health plan is an important and valued

protective benefit. It is considered a basic component of any benefits package today. Differences would be in coverage and method of delivering the service

Life InsuranceProviding employees with life insurance

coverage, as a protective form of benefit, is a common practice. Policies are usually fully paid by company, and this benefit is acknowledge as a supplement to the government-mandated and limited Employees Compensation Commission insurance coverage.

The usual terms of a life insurance coverage benefit are:

1. Coverage2. Premium3. Beneficiary

RetirementSecurity and protection benefits are crucial in

the compensation package of employees in the Philippines. In this country, providing security and protection for aging employee is supported by law and is joint undertaking between the Social Security System, the employer and in some cases, the employee.

Elements of a Retirement Plan Type of plan Tax qualification Eligibility Requirements Benefits under other conditions Vesting schedule Funding and sharing Investment management Tax exemption Cost effectiveness Professional management Ease of administrative burden Protection

Car and Car-related BenefitsCar benefits are more narrowly defined in

terms of eligibility. In many cases, eligibility would be defined in terms of management rank or nature of work. In one company, a car benefit is given only to the head of the organization and his/her direct reports or the executive team

The other provision of a car benefit program may be Car make/model Acquisition Replacement period Personal usage Related Expenses Purchase option and price Tax impact of car benefit

Other Benefits

AllowanceCompanies could provide to selected

employees various forms of allowances to compensate for extraordinary circumstances based on certain conditions.

a. Overtime/ Transportation Allowance

RecognitionCompanies use recognition programs and

contests to focus on tactical objectives and celebrate the success of teams and individuals. There are various forms of recognition----financial, and non financial; individual and team.

Social Security System Benefits

1. Sickness BenefitThe sickness benefit is daily cash allowance

paid to a member for the number of days the member is unable to work due to sickness or injury for at least four days.2. Maternity Benefit

The SSS Maternity benefit is a daily cash allowance granted to a female member who is unable to work due childbirth or miscarriage.

3. Disability benefitThe SSS Disability benefit is to paid to a

member who becomes permanently disabled, either partially or totally

4. Retirement BenefitsThe SSS retirement benefit is paid to a

member who can no longer work due to old age (60 years). This can take the form of either a monthly pension or lump sum amount.

5. Death BenefitsThe death benefit is paid in cash to the

beneficiaries of a deceased member.

National Health Insurance Program Benefits(Mediocare)

This is a health insurance program for SSS members and their dependents whereby the healthy subsidize the sick who may find themselves in need of financial assistance when they get hospitalized. The program aims to provide medical care to residents of the country in an evolutionary way.

Death BenefitsThe benefits under Mediocre are:

LoansThe principal mandate of the SSS is to give

social security protection. For this reason, it funds and programs are geared towards the retirement, death and disability programs. However, at the same time, the SSS provides various loans programs from which member can borrow for various purposes including: dependent education, increase in savings, housing, and investment.

Salary LoanA loan intended to meet the member’s short-

term credit needs can be made through SSS. The loanable amount is based on the highest salary credit of the last two monthly contributions of the member that are posted in the SSS master file. An annual interest of 8% applies. The loan is payable within two years.

Privatization Fund Loan ProgramThe Privatization Fund Loan Program is

lending program with an original allocation of Php.2 billion which enables members to increase their savings or investments through the purchase of privatized shares of stocks on an instalment basis and to provide them with an additional source income.