Module 5 Maintenance and Rewarding of Employees

LESSON 5

EMPLOYEE BENEFITS AND SERVICES

Learning Objectives:

After the completion of the chapter, students will be able to:

1. Explain the different benefits and services for human resources;

2. Evaluate the different classification of employee benefits and services;

3. Design a benefits program for employees.

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EMPLOYEE BENEFITS AND SERVICES

Benefits

Generally, refer to various rewards, incentives and other things of value than
an organization provides for its employees beyond their wages, salaries and other
forms of direct financial compensation.

Categories of Employee Benefits

1. Benefits voluntarily given by the company depending on management

generosity

2. Benefits required by government legislation

Tax Advantages of Benefits

⚫ Employers could deduct the costs of benefits as a business expense and the
employees do not need to include the value of health benefits in their taxable
income.

⚫ Employers provide benefits that are much less costly than the benefits
workers could purchase on their own because of tax exemptions of benefits
which can also serve as incentives for employers to give more benefits.

⚫ Benefits constitute a major portion of labor costs.

Non-Taxable Benefits Under the Code

⚫ Compensation for sickness or injury

⚫ 13th month pay and other bonuses not to exceed P30,000 per year

⚫ Allowances and benefits given for the convenience of the employer

⚫ Allowances and benefits given which are or necessary to the taxpayer’s

business, trade or profession

⚫ SSS, Philhealth and Pag-ibig contributions, as well as union dues

⚫ Contributions of the employers for the benefit of the employee including

retirement, hospitalization, and health insurance

De minimis benefits

⚫ Benefits which are facilities or privileges furnished or offered by an employer

to his/her employees that are of relatively small value and are offered or
furnished by the employer merely as a means of promoting the health,
goodwill, contentment, or efficiency of its employees.

⚫ Excluded from the gross income of employees for income tax purposes (tax
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exempt)
Considered as De minimis benefits

⚫ Monetized unused vacation leave credits of employees not exceeding 10

days during the year and the monetized value of leave credits paid to
government officials and employees

⚫ Medical cash allowance to dependents of employees not exceeding P750.00

per employee per semester or P125.00 per month

⚫ Rice subsidy of P1500.00 or one sack of rice per month amounting to not
more than P1500.00

⚫ Uniforms and clothing allowance

⚫ Actual yearly medical benefits

⚫ Laundry allowance

⚫ Employee achievement awards (service awards, safety achievement)

⚫ Gifts given during Christmas and major anniversary celebrations

⚫ Flowers, fruits, books, or similar items given to employees under special

circumstances (on account illness, marriage, birth or a baby, etc)

⚫ Daily meal allowance for overtime work

Employee Allowance

A universal benefit awarded to employees in the various levels in an

organization

1. They are nontaxable.

2. They come in different forms. (Grand vacations, use of company facilities)

3. Employee allowances are exempt from tax if they do not exceed the price
ceilings set by law.

4. Fringe benefits that exceed the price limit on benefits are no longer tax-
exempt, and the benefactor will shoulder the tax imposed on it.

5. Only the “de minimis” benefits with small and limited only to facilities and
privileges furnished by companies to promote goodwill, health, efficiency, and
contentment to employees are exempt from tax.

6. Employee allowance is given at a company’s discretion and goodwill.

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Classification of Employee Benefits and Services

A. Mandatory Employee Benefits/Legally Required Benefits in the Philippines

1. Social Security System (SSS) – created to provide private employees and their
families with protection against disability, sickness, old age and death
Benefits given to SSS Members.

a. Sickness benefit

⚫ Daily cash allowance paid for the number of days a member is unable
to work due to sickness or injury
⚫ Confinement either in a hospital for at least 4 days
⚫ At least 3 months of contributions within the 12 –month period
immediately before the semester of sickness has been paid

b. Maternity benefit

⚫ Daily cash allowance granted to a female member who was unable to

work due to childbirth or miscarriage
⚫ Failure to observe the rule on notification may result to the denial of
the maternity claim
⚫ The maternity benefit is equivalent to 100% of the member’s average
daily salary credit multiplied by 105 days
⚫ The maternity benefit shall be paid only for the first four (4) deliveries
or miscarriages

c. Retirement benefit

⚫ Cash benefit either in monthly pension or lump sum paid to a member

who can no longer work due to old age
⚫ A member, who is 60 years old, must be separated from employment
or ceased to be self-employed and has paid at least 120 monthly
contributions prior to the semester of retirement
⚫ A member who is 65 years old whether employed or not must have
paid at least 120 monthly contributions prior to the semester of
retirement
⚫ Monthly pension depends on the member’s paid contributions
including the credited years of service (CYS) and the number of
dependent minor children but not to exceed 5
⚫ 40% of the average monthly credit; or
⚫ P1200.00, provided that the CYS is at least 10 or more but less than
20, and P2000.00 if CYS is 20 or more

d. Disability benefit – any restriction or lack (resulting from impairment) of ability

to perform an activity in the manner or within the range considered normal for
a human being
- a member who suffers partial or total disability with a least one monthly
contribution paid to the SSS prior to the semester of contingency is qualified.

Permanent total disabilities include:

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⚫ Complete loss of sight of both eyes

⚫ Loss of two limbs at or above the ankles or wrists
⚫ Permanent complete paralysis of two limbs
⚫ Brain injury resulting to incurable imbecility or insanity
⚫ Such cases as determined and approved by the SSS

e. Death benefit – includes cash benefit either in monthly pension or lump sum
paid to the beneficiaries of a deceased member

f. Funeral Grant – a funeral grant of minimum of P20,000.00 to P40,000

depending on the CYS (effective August 1, 2015) is given to whoever pays
the burial expenses of the deceased member or pensioner

2. Government Service Insurance System (GSIS) – equivalent of SSS for

Philippine government employees

Benefits Given to GSIS Members

⚫ Life insurance
⚫ Retirement Benefits
⚫ Disability benefits – granted to a member due to the loss/ reduction on
earning capacity caused by a loss/impairment of the normal functions of the
employee’s physical and/or mental faculties because of an injury/disease
⚫ Beneficiaries are entitled to P20,000.00 funeral benefits
⚫ Survivorship benefit – 50% of the basic monthly pension of the member
/pensioner

3. Home Development Mutual Fund (HDMF)/Pagtutulungan sa Kinabukasan,

Ikaw, Bangko, Industriya at Gobyerno (PAGIBIG) – a provident savings system
providing housing loans to private and government employee and to self-employed
persons who elect to join the fund; provides lowest interest housing and land
acquisition loans to its members that are payable for up to 30 years.

Services

⚫ Multi-purpose Loan
⚫ Calamity Loan
⚫ Housing Loan

4. Philippine Health Insurance Corporation (Philhealth) – designed to provide

employees with a practical means of paying for adequate medical care in the
Philippines

Benefits

⚫ Inpatient benefits – subsidy for room and board, drugs and medicines,
laboratories, operating room and professional fees for confinements of not
less than 24 hours
⚫ Outpatient benefits – day surgeries, dialysis and cancer treatment procedures
such as chemotherapy and radio therapy in accredited hospitals and free-
standing clinics
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⚫ Lifetime membership

5. Employees’ Compensation – a compensation package for public and private

sector employees and their dependents in the event of work-related injury, sickness,
disability, or death; purely employer-based contribution benefit; the employee is not
required to contribute any amount to the program.

Options for Compensation Benefits

⚫ Cash income benefits for disability or death

⚫ Medical and related services for injury or sickness
⚫ Rehabilitation services for permanent disability

6. 13th Month Pay – all Filipino employees are entitled to a year-end bonus
equivalent to 1 month salary regardless of the nature of their employment (PD 851)

Computed as:

Basic Monthly Pay / 12 x No. of months worked within the Calendar Year

7. Service Incentive Leave (SIL) – an employee who has worked for at least one (1)
year in a company is entitled to five (5) days leave of absence, with pay, every year.

Illustration:

An employee who is hired on January 1, 2010 and resigned on March 1,

2011, assuming he has not used or commuted any of his accrued SIL is entitled upon
resignation to the commutation of his accrued SIL as follows:

SIL earned as of December 31, 2010 = 5 days

Proportionate SIL for January & February 2011 = (2/12) x 5 days = 0.833 day

Total as of March 1, 2011 = 5.883 days

8. Paternity Leave – granting every married male employee seven (7) working days
of leave after his legitimate wife’s childbirth or any miscarriage up to the first four
deliveries.

9. Meal and Rest Periods – employees are entitled to one (1) hour break meals on
an 8-hour workday and coffee/snack breaks for 15 minutes in the morning and
afternoon.

10. Right to Holiday Pay under Art 94 of the Labor Code

a. Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than 10
workers.

b. The employer may require an employee to work on any holiday, but such
employee shall be paid a compensation equivalent to twice his regular rate;
and,
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c. The following are the 11 regular holidays in the Philippines under EO 292 as
amended by RA 9492 – New Year’s Day; Araw ng Kagitingan; Maundy
Thursday; Good Friday, Labor Day; Independence Day, National Heroes Day;
Bonifacio Day; Christmas Day; Rizal Day;and, observance of Eid’l and Eidul
Adha

11. Premium payment – compensation for work hours rendered exceeding the
maximum number of working hours which is normally 8 hours per day.

Computing Premium Pay

The Labor Code of the Philippines sets premium rates at 25% of employees’
regular wage on regular days.

This is increased to 30% if they render overtime on their rest day or on a

holiday.

⚫ A special holiday (130% X basic pay)

⚫ A holiday that falls on a rest day (150% X basic pay)
⚫ A regular holiday (200% X basic pay)
⚫ A regular holiday that falls on rest day (260% X basic pay)

12. Night Shift Differential – every employee shall be paid a night shift differential of
not less than ten percent (10%) of his/her regular wage for each hour of work
performed between ten o’clock in the evening and six o’clock in the morning

Benefits Given Because of Management Generosity

1. Holiday/Christmas Bonus
2. Midyear Bonus
3. Cost of Living Allowances (rice, medicine and clothing)
4. Paid Holiday and Vacation Leaves
5. Sick Leave
6. Emergency/Bereavement Leave
7. Birthday Leave
8. Healthcare/HMO coverage
9. Group Life Insurance
10. Pension Plans

Executive Compensation

1. Cash Compensation – sum of all standard cash salary compensation that the
executive receives for the year

2. Long-term Incentive Plans (LTIPs) – all compensations that are tied to

performance for tax purposes

3. Retirement Packages – given to executives after they retire from the company

4. Executive Perks – various other perks given to executives, including the use
of a private jet, travel reimbursements and other rewards
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Employee Services

1. Personal services benefits such as credit union, counseling service and legal
service.

2. Job-related services benefits such as free uniforms, food services or

cafeteria, educational subsidies or grants and stock ownership options.

⚫ All these benefits are equivalent to 30-50% of an employee’s yearly wage,

sometimes more.

⚫ Companies who know how to take good care of their employees will have a lower
employee turnover rate than those that give no more than government-required
benefits.

⚫ Labor laws and procedures are tilted in favor of the worker under the social
justice principle that those who have less in life should have more in law.

For additional information on employee benefits and services:

https://www.youtube.com/watch?v=Dyhpr8KjP4o

https://www.youtube.com/watch?v=qmS6HtQdO0k

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Learning Activity

Why do employers need to offer benefits and services?

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