Notes on Chapter 5, Lesson 2 and 3

Staffing Function - Compensation/Wages and Performance Evaluation and Appraisal

What is Compensation/Wages and Performance Evaluation and Appraisal?

Compensation/wages and performance appraisal are related to each other
because employees’ excellent or poor performance also determines the compensation
given to them after considering other internal and external factors like actual worth of
the job, compensation strategy of the organization, condition of the labor market, cost of
living and area wages rates, among others. Compensation may come in different
forms. It maybe direct, indirect or nonfinancial.
Direct Compensation Indirect Compensation Nonfinancial
Compensation
 Worker’s Salaries Benefits other than  Recognition programs
 Incentive Pays financial remunerations  Enjoying management
 Bonuses  Travel support
 Commissions  Health  Ideal work environment
 Education  Convenient work hours
 Etc.  Assigned to rewarding
jobs

Compensation Guidelines
Compensation guidelines are influence by the nature and environment of a particular
industry. For example, the pharmaceutical, banking, telecommunications, and the hotel
industries offer attractive compensation packages. The government also imposes
regulations and restrictions on salaries of employees like the minimum wage law.
Connecting Compensation to Organizational Objectives
Worker compensation/wages had tremendously changed in the 21 st Century due to
increased market competitions (both local and global), required skills form workers, and
changes in technology, among other. Along with these, organizations’ pay philosophies
have also changed. Instead of paying employees based mainly on their job positions or
titles they are now given pay according to their individual competencies or
according to how much they could contribute or have contributed to their
company’s success. Wage experts now prepare compensation packages that
create value for both the organization and its employees.
Compensation: a motivational factor for employees
Compensation pay represents a reward that an employee receives for good
performance that contributes to the company’s success. In relation to this, the following
must be considered:
Pay Equity: related to fairness; it is a motivation theory focusing on employee’s
response to the pay that they receive and the feeling that they receive less or more than
they deserve.
Employees generally feel that their pay must commensurate to the effort exerted
in the performance of their job. Pay equity is achieved when the pay given to them by
their employees is equal to the value of the job performed; thus, this motivates them to
perform well and to do their jobs to the best of their abilities.
Expectancy Theory: another theory of motivation which predicts that employees are
motivated to work well because of the attractiveness of the rewards or benefits that they
may possibly receive from a job assignment.
The employees’ perception of the compensation or pay attached to a job position
is an important factor in ascertaining the motivational value of the compensation.
Compensation is usually time-based. Employees may be compensated based on
the following:
Piecework Basis – theory of motivation which predicts that employees are motivated to
work well because of the attractiveness of the rewards or benefits that they may
possibly receive from a job assignment.
Salary refers to compensation given to professionals on a monthly or semi-monthly
basis.
Wages refers to compensation given on a weekly or daily basis and usually applies to
manual workers such as carpenters, plumbers, electricians, and the like.
Base Pay or Basic Pay - is the fixed part of the pay. It is the minimum payment for the
tasks rendered by the employee based on his or her position or job title.
 Purposes of Performance Evaluation:
Improving individual job performance through performance evaluation is just one of the
reasons why employees are subject to assessment on a continuous basis.
 Administrative Purposes – these are fulfilled through appraisal/evaluation
programs that provide information that may be a basis for compensation
decisions, promotions, transfers and termination. Human resource planning may
also make use of it for recruitment and selection of potential employees.
  Developmental Purposes – these are fulfilled through appraisal/evaluation
programs that provide information about employees’ performance and their
strength and weaknesses that may be used as basis for identifying their training
developmental needs.
Performance Appraisal Methods
Methods of evaluating workers have undergone development in order to adapt
new legal employment requirements and technical changes. Some appraisal methods
used today are the following:
1. Trait Methods – performance evaluation method designed to find out if the
employee possesses important work characteristics such as conscientiousness,
creativity, emotional stability, and others.
2. Graphic Rating Scales – performance appraisal method where each
characteristic to be evaluated is represented by a scale on which the evaluator or
rater indicates the degree to which an employee possesses that characteristics.
3. Forced-Choice Method - performance evaluation that requires the rater to
choose from two statements purposely designed to distinguish between positive
or negative performance; for example; works seriously – works fast; shows
leadership – has initiative.
4. Behavioral Anchored Rating Scale (BARS) - is behavioral approach to
performance appraisal that includes five to ten vertical scales, one for each
important strategy for doing the job and numbered according to its importance.
5. Behavior Observation Scale (BOS) – a behavioral approach to performance
appraisal that measures the frequency of observed behavior.
  Exercises and Activities
Read and follow carefully the given instructions in each activity.
Activity #1 Performance Task #3
Make an online interview, or text or even ask 5 employed individuals that you know in
your community (they maybe your family, friends, neighbors and the like). Use the table
below to show your answers. Complete the Table and answer the question given
below.

Name Company Category Employment Minimu Benefits (other

(Optional) (optional) Private or Status m Wage forms of
Organization Public (Regular- compensation)
where they (government) Permanent,
work Contractual,
Provisional)
1
2
3
4
5

Considering the table of minimum wage, do the 5 individuals have the same minimum
wages? If the answer is NO, what do you think are the reasons why companies offer
different salary scheme?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Activity #2
Explain the following terms. You may use another sheet of paper for your
answer.
1. Monthly-paid employees
2. Parental Leave
3. Wage
4. 13th Month Pay
5. Daily Paid Employees
6. Overtime Pay
7. Maternity Leave
 8. Wage Rationalization Act
9. Regional Tripartite Wages and Productivity Boards
10. Premium Pay
11. Holiday Pay
12. Paternity Leave
13. Night Shift Differential

Activity #3
Read the following scenarios, answer the questions below. You may use another sheet
of paper for your answers.
1. Flora Basa is a daily paid seamstress of Tela’s Tailoring Shop. She enjoyed
staying at Tela’s Tailoring Shop because of the kindness and generosity of the
owner, Mrs. Lyka Tela. During the time of the pandemic, she continues to work
from home to do the unfinished task. A week later, she brings the garments to
Mrs. Tela. The owner, Mrs. Tela generously communicated to Ms. Flora to
accept the following goods: 1 sack of rice worth P 2,210.00 and groceries worth
of P 1,500.00 as remuneration equals her piece of work. However, Ms. Flora
badly needed cash to buy medicines and other needs.

What will Ms. Flora do? Accept it or Not? Elaborate your answer. You may cite
legal basis to defend your answer.

2. Mr. James K. Ang has been working for almost 2 year as the production staff of
Izzed Candy Craze Store. His take home pay last December 15 th and 30th is P
7,800 respectively. Recently, he wondered that his January 15 th net pay is P
6,800. He saw that there were other deductions like donation, tokens, and
availed tickets as a fund rasing for the upcoming event sponsored by their
company. Mrs. Marie Chan confirmed that the deductions were instructed by
their authorities to support the sponsoring event of the company.
What do you think is/are the basic of the authorities of the company in deducting
the amounts of donation, token etc. from Mr. James’ salary? Explain your
answer.
Does Mr. James have the right to complain and claim the deductions back?
Justify your answer.

Enrichment Activity 1: Review (Written Assessment)

Write your answer on a separate sheet of paper.
1. What are the two purposes of performance evaluation?
2. Among the 4 performance appraisal methods, which do you think is more
effective and efficient? Why do you say so?