Compensation/Wages and

Performance Evaluation

Ria Mae Millado

Nhelia Salvador
 Compensation/wages

 all forms of pay given by

employers to their employees for
the performance of their jobs
 Performance Evaluation

 a process undertaken by the

organization, usually done once a
year, designed to measure
employee’s work performance
 Types of Compensation
Direct Compensation- includes worker’s salaries, incentive pay, bonuses, and
commissions
Indirect Compensation- include benefits given by employers other than
financial remunerations; for example: travel, educational and health benefits and
others
Nonfinancial Compensation-includes recognition programs, being assigned
to do rewarding jobs, or enjoying management support , ideal work
environment, and convenient work hours
 Connecting Compensation to
Organizational Objectives
 The daily minimum wage rate differs in relation to
factors such as geographical area and industry or
sector. The National Wages and Productivity
Commission is the government agency concerned
with minimum wage determination in the country.
 Compensation: A Motivation 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; the Equity Theory 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.
 Pay Equity- related to fairness; the Equity Theory 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.

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 job assignment.
 Bases for Compensation
Employees may be compensated on the following bases:
 Piecework basis- when pay is computed according to the number of units
produced
 Hourly basis- when pay is computed according to the number of work
hours rendered
 Daily basis- when pay is computed according to the number of work days
rendered
 Bases for Compensation
 Weekly basis- when pay is computed according to the number of work
weeks rendered
 Monthly basis- when pay is computed according to the number of work
months rendered
 Purposes of Performance Evaluation:
Administrative and Developmental
Improving individual job performance through
performance evaluation is just one of the reasons why
employees are subjected to assessments on a continuous
basis. There are other purposes behind employee
assessment that are benefit to both the company and the
employees, these are:
Administrative Purposes- these are fulfilled through appraisal/ evaluation
programs that provide information that may be used as basis for
compensation decisions, promotions, transfers, and terminations.

Developmental Purposes- these are fulfilled through appraisal/evaluation

programs that provide information about employees’ performance and their
strengths and weaknesses that may be used as basis for identifying their
training and development 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 in use
today are the following:
 Trait Methods- performance evaluation method designed to find out if the
employee possess important work characteristics such as conscientiousness,
creativity, emotional stability, and others
 Graphic rating scales- performance appraisal method where each characteristics
to be evaluated is represented by a scale on which the evaluator or rater indicates the
degree to which an employee possesses that characteristic
 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.
 Behaviourally anchored rating scale(BARS)- a behavioural 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
 Behaviour observation scale(BOS)- a behavioural approach to
performance to appraisal that measures the frequency of observed behaviour
 Why Some Evaluation Program Fail?
Performance appraisals( such as manager/supervisor appraisal, self- appraisal,
subordinate appraisal, customer appraisal, peer appraisal, team appraisal, or
360- degree appraisal) may sometimes fail due to various reasons including the
following:
 inadequate orientation of the evaluates regarding the objectives of the
program
 incomplete cooperation of the evaluates(e.g. proper answering of evaluation
questionnaire)
 bias exhibited by evaluators
 inadequate time for answering the evaluation forms
 ambiguous language used in the evaluation questionnaire
 employees’ job description is not properly evaluated by the evaluation
questionnaire used
 inflated ratings resulting from evaluator’s avoidance of giving low scores
evaluator’s appraisal is focused on the personality of the evaluation of the
evaluate and not his or her performance
unhealthy personality of the evaluator
evaluator may be influenced by organizational politics