FUNCTIONS AND

I M P O R TA N C E O F
C O M P E N S AT I O N ,
WA G E S A N D
PERFORMANCE
E VA L U A T I O N ,
APPRAISAL,
E M P L O Y E E R E L AT I O N S
AND MOVEMENT AND
R E WA R D S Y S T E M
 W H AT I S C O M P E N S AT I O N / WA G E S A N D
P E R F O R M A N C E E VA L AT I O N & A P P R A I S A L ?

Compensation/wages and performance evaluation are related to

each other because the employees’ excellent or poor performance
also determines the compensation given to them, after considering
other internal and external factors like the actual worth of the job,
compensation strategy of the organization, conditions of the labor
market, cost of living and area wage rates, among
others.Compensation may come in different forms. It may be
direct, indirect or nonfinancial.
C O M P E N S AT I O N G U I D E L I N E S
• Compensation guidelines are influenced by the nature and environment
of a particular industry. For example, the pharmaceutical, banking,
telecommunications, and hotel industries offer attractive compensation
packages. The government also imposes regulations and restrictions on
salaries of employees like the minimum wage law. As of December,
2019 the minimum wage law for the National Capital Region (NCR) is
P537 per day. Meanwhile, the minimum wage for other regions is
slightly lower. The wage law is set to protect manual workers from
being taken advantage of by companies.
• Compensation is usually time-based. The term salary refers
to compensation given to professionals on a monthly or
semi-monthly basis. The term wage 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 pay.
It is the minimum payment for the tasks rendered by the
employee based on his or her position or job title.
 P U R P O S E S O F P E R F O R M A N C E E VA L U A T I O N :
A D M I N I S T R AT I V E A N D D E V E L O P M E N TA L

• Administrative Purposes
These are fulfilled through appraisal/evaluation programs
that provide information that may be a basis for
compensation decisions, promotions, transfers and
promotions. Human resource planning may also make use of
it for recruitment and selection of potential employees.
D E V E L O P M E N TA L P U R P O S E S
• 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 development needs. Through this approach, the
workers become more receptive to the explanations given by the
organization’s management regarding the importance of having
evaluations at regular intervals – that these are conducted to
improve their competencies in order to prepare them for future job
assignments. Different performance methods are used and
depending on the information an evaluator aims to find out.
• 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:
•Trait methods – performance evaluation
method designed to find out if the
employee possesses 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
•Behaviorally 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 of
performance appraisal that
measures the frequency of observed
behaviour.
W H AT I S E M P L O Y E E R E L AT I O N S ?
• Employee relations apply to all phases of work activities in
organizations, and managers, to be effective, must be able to encourage
good employee relations among all human resources under his or her
care. Employees/workers are social beings who need connections or
relations with other beings-other employees/workers-who are capable of
giving them social support as they carry out their tasks in the
organization where working on a delicate task with others can be
comforting during times of stress, fears, or loneliness. Social support is
the sum total of perceived assistance or benefits that may result from
effective social employee relationships.
Barriers to good employee relations
Ways to overcome barriersto good employee relations
• Anti-social personality; refusal to share more • Develop a healthy personality to
about oneself to co-employees; being loner
overcome negative attitudes and
• Lack of trust in others
behavior
• Selfish attitude; too many self-serving motives
• Find time to socialize with co-workers
• Lack of good self-esteem
• Overcome tendencies of being too
• Not a team player
dependent on electronic gadgets
• Being conceited
• Cultural/subcultural differences
• Develop good communication skills
• Lack of cooperation
and be open to others opinion

• Communication problems; refusal to listen to • Minimize cultural/subcultural tension

what others seek to communicate
• Lack of concern for other’s welfare
THE FOLLOWING ELEMENTS ARE CONSIDERED IN
ESTABLISHING AND MAINTAINING GOOD
EM P LOYEE RELATION S.

Drive for commitment. When a company fosters good

• 1.

relationship between management and employees, the latter is

most likely to become loyal and committed to the organization.
• 2. Harmonization of terms and conditions of employment.
Management should ensure that employees are provided good
work conditions and benefits as stated in their employment
contracts.
• 3. Emphasis on mutuality. Management must be
inclusive and employees must feel that managers are
also a part of the work team.
• 4. Policies and practices for communication. Clear
and honest communication between employees and
management is a vital component of labor relations that
will ensure continuous and harmonious relationship
among members of the company.
W H AT I S E M P L O Y E E M O V E M E N T S ?
• Employee movements are inevitable and are often the result
of evaluation or structural changes within an organization. An
organization can move its employees either vertically or
horizontally. Vertical movement entails the movement of
employee from a lower position. Horizontal movements
involve the transfer of an employee to another department or
position with similar responsibilities or status.
• Promotion is a movement to a higher level or position. Companies
have different criteria on promotion. The usual criterion is a
combination of tenure and meritorious performance.
Promotion or career advancement is a process through which an
employee of a company is given a higher share of duties, a higher
pay-scale or both. A promotion is not just beneficial for employees but
is also highly crucial for the employer or business owners. It boosts
the morale of promoted employees, increases their productivity and
hence improves upon the overall profits earned by the organization.
• Tenure refers to the number of years in the service of an
employee while meritorious performance refers to an
excellent or outstanding performance of an employee.
Some companies may have a clear preference based on
loyalty of the employee or performance may have more
weight on the basis on how much the employee
contributes to the achievement of corporate goals.
• Demotion is ―opposite of promotion. Demotion
is the lowering of a rank, reduction in salary,
status and responsibilities. It may be defined as
the assignment of an individual to a job of lower
rank and pay usually involving lower level of
authority and responsibility.
 D E M O T I O N M AY TA K E P L A C E D U E T O T H E
FOLLOWING REASONS:
• a. Breach of discipline A breach of discipline may attract
demotion as a punishment. An organization can work only if
proper discipline is maintained. A punitive action for such breach
may be necessary so that people do not flout rules, regulation etc.
of the company.
• b. Inadequacy of knowledge A person may not be competent to
perform his job properly. He may not be able to meet job
requirements. In such situation, demotion is necessary.
• c. Unable to cope with change Now-a-days, there is a rapid change in
technology and methods of work. The existing employees may not be
able to adjust themselves as per the new requirements. It may be due to
lack of education, technical skill, ill health, old age or other personal
reasons. Under these circumstances new persons may be needed to take
up such jobs. d. Organizational re-organization Sometimes there may
be organizational changes. It may be by either combing the department
or closing some departments. In such situations, the number of position
may no longer be necessary and other employee may be posted to a
lower position.
• Transfer is a movement to another position but
with the same level or scope of responsibility. It
can also mean a transfer to another branch or
location but the employee still occupies the same
tasks. In some cases, an employee may have
another position but the level is still the same.
THE LAST TY PE OF M OVEM ENT IS SEPAR ATI ON OR AN
EMPLOYEE’S DEPARTURE FROM THE ORGANIZATION.
I T M AY TA K E T H E F O L L O W I N G F O R M S :

• 1. Resignation. This is an employee’s voluntary

decision to leave the organization. The usual
reason for employee’s resignation is to look for
better opportunities in other companies and avail
of higher salaries and benefits.
•
• 2. Separation with authorized cause. More commonly known as
layoff, this is the company’s decision to terminate employees due to
business reasons. One of the more common reasons is redundancy,
wherein the introduction of new technology will duplicate some of
the existing functions of certain jobs. The current job holders of such
functions will be given an appropriate severance package when they
leave the organization. The severance package consists of a
considerable monetary package to enable employees to maintain
their standard of living during the period that they are unemployed.
• 3. Separation with just cause. This occurs when an employee
is terminated due to theft, fraud, and other serious offenses. In
this case the employee does not receive any severance pay
from the company. Apart from being terminated from the
company, an employee who was found to have committed
grave offenses may also be subjected to legal sanctions. An
employee who receives an unfavorable evaluation at the end of
his or her probationary period can also be terminated.
• 4. Retirement. This refers to the end of a worker’s
employment with the company due to old age, illness, or
infirmity. There is no prescribed age for retirement,
although many companies set the normal retirement age for
employees at 60 years old. Some companies, however, set
their retirement age at 65. The retiring employee is given a
retirement package as mandated by law along with other
voluntary benefits from the company.
Activity # 1 quarter 2 (Submit on Dec 12, 2022)

1. Cut out job vacancy ads from newspapers/magazines

Check websites, posters and tv/radio advertisements
2. Interview employees/workers about “how the amount of
salary/wage influence/motivates the employees/workers to perform
their job; how strong/high is the correlation of the amount of salary to
the employee’s performance; other reasons or factors influencing the
employees/workers to stay and further improve the performance of
their job.