UNIVERSITY OF SAINT ANTHONY

(Dr. Santiago G. Ortega Memorial)

Iriga City
COLLEGE OF BUSINESS EDUCATION

Name: Cezar Hermoso Jr. BSBA 3- HRDM

Instructor: Mrs. Jane Benigay

Subject: BAPC 8 “Special Topics HRM”

FINAL EXAMINATION

Questions:

I – ESSAY -100%

1) Discuss and explain at least 2 compensation system used by organizations today. 20%

2) What are the factors to consider in designing compensation system, explain. 20%

3) What is equity theory by Stacey Adams? 10%

4) What are the factors affecting pay designs? Explain. 20%

5) Discuss briefly the following: 30%

a) Forms of pay

b) Steps involved in developing a compensation structure using job-based method

Answers:

1.

1. Benefits (insurances, standard vacation policy, retirement)

2. Base pay (hourly or salary wages)

2. In-demand skill sets

When it comes to determining compensation, key skills may be an even more reliable metric to
compare against than job title. After all, different companies may have very different definitions
of the same job title. On top of that, many skill sets can apply to a wide variety of roles – all of
which are effectively competing for the same talent. That’s why it’s important for employers to
consider the value of key skills when determining compensation.

Supply and demand

 UNIVERSITY OF SAINT ANTHONY
(Dr. Santiago G. Ortega Memorial)
Iriga City
COLLEGE OF BUSINESS EDUCATION

It’s crucial to be aware of the availability of relevant talent in the geographic region where
you’re recruiting. If you’re recruiting in an area where the demand for a certain skill sets and
experience outweighs the supply, you should expect to pay more in order to attract talent.

3. Adams' Equity Theory calls for a fair balance to be struck between an employee's inputs
(hard work, skill level, acceptance, enthusiasm, and so on) and an employee's outputs (salary,
benefits, intangibles such as recognition, and so on).

According to the theory, finding this fair balance serves to ensure a strong and productive
relationship is achieved with the employee, with the overall result being contented, motivated
employees.

4. Among the internal factors that affect pay structure are the compensation policies,
organizational ability to pay, job analysis, and job descriptions, employee, trade union's
bargaining power. External and Internal Factors Affecting Employee Compensation Factors
Affecting Employee Compensation – External and Internal Determinants of Compensation The
compensation awarded to the employee is dependent on the volume of effort exerted, the
nature of job and his skill. Besides, there are several other internal and external factors
affecting the compensation.

I. External Determinants of Compensation:

a. Labour Market Conditions:

The forces of demand and supply of human resources, no doubt, play a role in
compensation decision. Employees with rare skill sets and expertise gained through
experience command higher wage and salary than the ones with ordinary skills
abundantly available in the job market. But the higher supply of human resources for
certain jobs may not lead to reduction of wages beyond a floor level due to
Government’s prescription of minimum wage levels and employee union’s bargaining
strength.

b. Economic Conditions:

Organizations having state-of-the-art technology in place, excellent productivity records,

higher operational efficiency, a pool of skilled manpower, etc., can be better pay
masters. Thus, compensation is the consequence of the level of competitiveness
.prevailing in a given industry.

c. Prevailing Wage Level:

Most of the organizations fix their pay in keeping with the level for similar jobs in the
industry. They frequently conduct wage survey and accordingly seek to keep their wage
level for different jobs. If a particular firm keeps its pay level higher than those of others
in the industry, its employee cost becomes heavier which may escalate the end cost of
 UNIVERSITY OF SAINT ANTHONY
(Dr. Santiago G. Ortega Memorial)
Iriga City
COLLEGE OF BUSINESS EDUCATION

the products. This will affect the competitiveness of the firm. On the other hand, if a
firm keeps its pay level lower than the prevailing rates, it may not recruit the skilled and
competent manpower.

d. Government Control:

Government through various legislative enactments such as Minimum Wages Act, 1948,
Payment of Wage Act, 1936, Equal Remuneration Act, 1976, Payment of Bonus Act,
1965, dealing with Provident Funds, Gratuity, Companies Act, etc., have a bearing on
compensation decisions. Therefore, firms have to decide on salaries and wages in the
light of the relevant Acts.

e. Cost of Living:

Increase in the cost of living, raise the cost of goods and services. It varies from area to
area within a country and from country to country. The changes in compensation are
based on consumer price index which measures the average change in the price of basic
necessities like food, clothing, fuel, medical service, etc., over a period of time.
Allowances like Dearness Allowance. City compensatory allowances are paid to meet the
increasing cost of living and parity among employees posted at different geographies.

5.)