CHAPTER 10:

COMPENSATION
AND
BENEFITS
 LEARNING OUTCOMES (LO) CHAPTER 10:
AFTER READING THE CHAPTER, STUDENTS
SHOULD BE ABLE TO:

LO 1: Define Compensation and Benefits

LO 2: Differentiate Incentive programs, Comparable Worth

and Benefits Programs

LO 3: Describe, discuss, and explain the Laws on Wages and

Working Hours in the Philippines

LO 4: Demonstrate how to compute Overtime Pay

A COMPENSATION is an organized system to providing
monetary worth to employees in exchange for work
performance, while BENEFITS refer to the form of
compensation paid by employers over and above regular
salary or wages.
WAGES AND SALARIES

Within the wage and salary levels, managers must decide how
much to pay individual workers. Two employees may do
exactly the same job but the employee with more experience
may earn more, in part to keep that person in the company.
Some union contracts specify differential wages based on
experience. Note, however, that the basis for differential pay
must be job-related, not favoritism or discrimination.
 INCENTIVE PROGRAMS

The term incentive program refers to an official monetary

plan designed to motivate and recognize employees
performance.

Sales bonuses are a typical incentive. Under such a

program, employees who sell a certain number or amount of
goods for the year receive a special payment. Employees who do
not reach this goal, earn no bonus.

Companies may offer incentive plans to all their

employees. Gain-sharing incentive distribute bonuses to all
employees in a company based on reduced costs from working
more efficiently.

Profit-sharing plans are based on the company’s

profitability level. Profits acquired over and above a specific
quota are shared with employees.
 COMPARABLE WORTH

Comparable worth is a legal principle or concept stating that

regardless of sex, employees should be compensated equally for
jobs involving the same degree of skills, responsibilities, and
effort performed on the job. Proponents of comparable worth
say that all the jobs in a company must be evaluated and then
rated in terms of basic dimensions such as the level of skill they
require. All jobs could then be compared based on a common
index.

BENEFITS PROGRAMS

A growing part of nearly every firm’s compensation system is

benefits programs, that is, compensation other than wages and
salaries. Benefits now often comprise over half a firm’s total
compensation budget. Most companies are required by law to
provide worker’s compensation, holiday pay, and insurance
contributions. Most businesses also voluntarily provide
extended health, life, and disability insurance.
 LAWS ON WAGES AND WORKING HOURS IN THE
PHILIPPINES

“The State shall afford protection to labor, promote full

employment, ensure equal work opportunities regardless of
sex, race or creed, and regulate the relations between
workers and employees. The state shall assure the rights of
workers to self-organization, collective bargaining, security
of tenure, and just and humane conditions of work.”

Remuneration which provides all workers, as a minimum

with:

 fair wages and equal remuneration for work of equal value

without distractions of any kind, women in particular
being guaranteed conditions of work not inferior to those
enjoyed by men, with equal pay for equal work; and,

 a decent living for themselves and their families.

 THE RIGHTS OF WORKERS IN THE PHILIPPINES WITH
REGARD TO REST, WORKING HOURS, AND HOLIDAYS

The Philippine Labor Law provides for the following rights:

 Considering that the normal hours of work shall not exceed

eight hours a day, the right not to be required to perform
overtime work except in emergency and the right to overtime
pay for overtime work.
 The right to a meal period.
 The right to night shift differential pay.
 The right to a weekly rest day.
 The right not to be required to work on a rest day, except for
emergency work.
 The right to additional compensation for rest day or holiday
work.
 The right to holiday pay for a regular holiday as differentiated
from one which is not a regular but a special holiday.
 The right to a service incentive leave.
 MINIMUM WAGE LAW

Republic Act 602, known as the Minimum Wage Law applies to

employees in private enterprises, be they in agriculture, industry
or trade. Employees of religious, charitable, and educational
organizations are also covered by the law. The law covers all
employees in the government service-national, provincial,
municipal, and city, or those in government owned or controlled
corporations.

This law does not apply to farm tenancy, household service, and
employment in needlework in the houses or in any cottage
industry registered with the National Cottage Industries
Development Authority. The Minimum Wage Law is applicable to
all employees except home workers engaged in needle work by
hand, workers on farm tenancy, domestic servants, retail or service
establishment that regularly employ not more than five employees,
and apprentices, handicapped workers, students and graduates of
Nautical School.
MEAL AND REST PERIODS

A worker is entitled to not less than one hour time-off for regular
meals, and to rest periods or coffee breaks of five to twenty minutes
except as provided in the Implementing Rules and Regulations.

This meal period may be shortened under the following conditions:

 when the work is non-manual in nature or does not involve

strenuous physical exertion;
 when there are actual or impending emergencies or when there is
urgent work to be performed in machinery, equipment or
installations to avoid serious loss which the employer would
suffer; and
 when the work is necessary to prevent serious loss of perishable
goods.

A shorter meal period of not less than 20 minutes may be allowed,

provided that this shorter meal period is credited as compensable
hours worked.
NIGHT SHIFT DIFFERENTIAL PAY

The Labor Code grants the right to night shift differential pay in
recognition of the discomforts, disadvantages, and dangers of working at
night.

For night work performed on ordinary days, an employee shall be

paid not less than 10% of his regular wage for each hour of night work, i.e.
between 6:00 o’clock in the evening to 6o’clock in the morning.

For night work performed on rest days and/or special holidays, an

employee shall be paid an amount equivalent to his regular wage plus at
least, 30% additional amount of not less than 10% of such premium pay for
each hour of work performed.

For night work performed on regular holidays, an employee shall be

paid his regular wage during these days plus an additional compensation of
not less than 10% of the hourly rate for each hour of work performed. When
an employee is asked to work after his work schedule, he shall be entitled to
his regular wage plus, at least, 25%, plus an additional amount of not less
than 10% of this overtime rate for each hour of work performed between
10p.m. to 6a.m.
 EMPLOYEES DENIED THE BENEFIT OF RECEIVING NIGHT
SHIFT DIFFERENTIAL PAY ARE THE FOLLOWING:

 Those in the government and any of its political subdivisions,

including government owned or controlled corporations;

 Those of retail and service establishments regularly employing not

more than five workers;

 Domestic helpers and persons in the personal service of another;

 Managerial employees;

 Field personnel and other employees whose time and performance

are unsupervised by the employer, including those who are engaged
on a task or contract basis; and,

 Those who are fully commissioned or who are paid a fixed amount
for performing work irrespective of the time consumed in its
performance.
 OVERTIME

A covered employee who works beyond eight hours on

an ordinary working day shall be paid for overtime work an
amount equivalent to his regular wage plus, at least, 25%.

A covered employee who works on his designated rest

day shall be paid an additional compensation as premium pay of
not less than 30% of his regular wage. If he works on such a rest
day in excess of eight hours, he shall be paid for an additional 8
hours work plus, at least, 30% thereof.

An employee who works on a special holiday shall be

governed by the same rule enunciated for a covered employee
who works on his rest day. An employee who works on any
regular holiday shall be paid in addition to, at least, 20% of his
regular daily wage. If he works on such a holiday in excess of 8
hours, he shall receive additional compensation for the overtime
work equivalent to his rate for the first three hours of such
holiday work plus, at least, 30% thereof
COMPUTATION OF OVERTIME PAY

Assuming that the mininum wage rate is ₱250, how much is the
overtime rate per hour?
ON ORDINARY DAY:
On an ordinary day, the overtime rate per hour is determined as
follows:

First, compute the hourly rate of the employee.

Regular hourly rate = minimum wage rate/8 hours

= ₱250 / 8 = ₱31.25 per hour

Now to determine overtime rate per hour:

Overtime rate = regular rate + 25% of regular hourly rate

OT rate = ₱31.25 + (25% of ₱31.25) or ₱31.25 x 1.25 = ₱39.06 per

hour
ON REST DAY AND SPECIAL DAY

Compute the hour rate of the employees on rest day or special day

Hourly rate = 130% of regular hourly rate (₱31.25 x 1.30) =

₱40.625 per hour

Note: The hourly rate on rest day and special day is 130% of the
regular rate.)

To determine overtime rate per hour:

Overtime rate = Hourly rate on rest day + 30% Hourly rate on rest
day

=₱40.625+ (30% of ₱40.625) = ₱40.625 x 1.30 = ₱52.81 per hour

ON REST DAY WHICH FALLS ON A SPECIAL DAY

Compute the hourly rate of the employee on a rest day which falls
on a special day:

Hourly rate = 150% of regular hourly rate:

= ₱31.25 x 1.50 = ₱46.875 per hour

To determine overtime rate per hour:

Overtime rate = Hourly rate + 30% of Hourly rate = ₱46.875 +

(30% of ₱46.875)

₱46.875 x 1.30 or ₱60.94 per hour

ON A REGULAR HOLIDAY

Compute the hourly rate on regular holiday:

Hourly rate = 200% of Regular hourly rate

₱31.25 x 2 = ₱ 62.50 per hour

To determine overtime rate per hour:

Overtime rate = Hourly rate + 30% of Hourly rate

₱ 62.50 + (30% of ₱62.50)

₱62.50 x 1.30 or ₱81.25 per hour

 ON A REST DAY WHICH FALLS ON A REGULAR
HOLIDAY

Hourly rate = 260% of regular hourly rate

= ₱31.25 x 2.60 = ₱81.25 per hour

Compute the hourly rate:

Hourly rate = 260% of Regular hourly rate

₱31.25 x 2.60 = ₱ 81.25

To determine overtime rate per hour:

Overtime rate = Hourly rate + 30% of Hourly rate

₱81.25 + (30% of ₱81.25)

₱81.25 x 1.30 = ₱105.625 per hour

 PHILIPPINE NATIONAL HOLIDAYS - 2019

REGULAR HOLIDAYS SPECIAL (NON- ADDITIONAL NON-

WORKING) HOLIDAYS WORKING HOLIDAYS
New Year’s Day - Chinese New Year - All Souls Day -
January 1 February 5 November 2
Araw ng Kagitingan - EDSA People Power Christmas Eve -
April 9 Revolution Anniversary December 24
Maundy Thursday - - February 25
April 18
Good Friday – Black Saturday - April
April 19 20
Labor Day – Ninoy Aquino Day -
May 1 August 21
Independence Day - June All Saints Day -
12 November 1
National Heroes Day – Feast of the Immaculate
August 26 Conception of Mary
(Last Monday of August) - December 8

Bonifacio Day – Last Day of the Year -

November 30 December 31
Christmas Day –
December 25
Rizal Day –
December 30
WORK NEED NOT BE CONTINUOUS.

Work performed by the employee need not be continuous as long as it falls

within the same work day. For example, an employee who works in two
shifts, one from 8a.m. to 12a.m. (four hours), and another from 4PM to 8PM
of the same work day (another four hours), suffers a total of eight hours of
work. If he is required to work for another hour within the same work day
(from 8a.m. to 8AM of the following day), then such work is subject to
overtime pay.
UNDER TIME CANNOT BE OFFSET BY OVERTIME.

Some employers have the practice of offsetting under time and overtime. For
example, if an employee work for only 7 hours on any given day (one hour
under time), he will be required to make up for his under time by requiring
him to render additional one hour work on another day. This practice is
prohibited under Article 87 of the Labor Code, viz:

Article 87. Under time not offset by overtime. Under time work on any
particular day shall not be offset by overtime work on any other day.

The rationale for provision is quite obvious. Offsetting under time against
overtime is improper because the employee would be deprived of the
additional compensation for the overtime work he has rendered.
EMERGENCY OVERTIME WORK

As a general rule, employees may not be compelled to work in excess of

eight hours or to render overtime work on any given day against his will.

The exception to this rule, however, is found in Article 89 of the Labor

Code. Under the said article, employees may be compelled to perform
overtime work in any of the following cases:

 When the country is at war or under any national or local emergency;

 When overtime work is necessary to prevent loss of life or property, or
in case of imminent danger to public safety;
 When there is urgent work to be performed on machines, etc., in order
to avoid serious loss or damage to the employer;
 When the work is necessary to prevent loss or damage to perishable
goods;
 When the completion or continuation of work is necessary to prevent
serious obstruction or prejudice to the business; and,
 When overtime work is necessary to avail of favorable weather or
environmental conditions.
WEEKLY REST PERIOD

All employees, whether operating for profit or not, including

public utilities operated by private persons, shall provide their
employees with a weekly rest day as provided in the Labor Code.

As a general rule, the employer may schedule the rest day of

his employees as he sees fit. The preference of the employee as to his
weekly rest day, if based on religious grounds shall be respected by
the employer. However, in case of necessity, the employer may
schedule the weekly rest day of the employee’s choice for only two
days in a month.
When the weekly rest day is given to all employees
simultaneously the employer shall make known such rest period by
means of a written notice posted conspicuously in the workplace ,at
least, one week before it becomes effective.

When the rest period is not granted, collectively, the

employer shall inform the employees of their respective schedules of
weekly rest through written notices one week in advance.
LEGALLY REQUIRED BENEFITS AND SERVICES