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Wednesday, November 16, 2011

Wage and Salaray Administration

Basically, what I knew about the word compensation before is that it is a payment when you render a service or job to a certain employer. However, after enrolling the course the first thing I learned is about the reality of the word compensation. Now, I know that compensations are not simply a payment for labor or services to a worker, but it is the remuneration on an hourly, daily or weekly basis or by the piece of work you are able to produce in a day. It can be a form of direct and an indirect monetary and non-monetary compensation. The word compensation is an umbrella term for salary and wages which also include the benefits, the incentives and rewards to make up the total compensation package for an employee.

There quite a number of theories have been used as a basis for paying employees and these includes the Subsistence Theory which postulates that is paying the workers the minimum wage to sustain the their lives. However critics said that it is no longer appropriate to pay subsistence wage at present, because certain factors influence it like technology and some other factors that caused the demand for labor to increase faster. Another theory is the Wage Fund Theory which pays the employees according to the sum of amount of funds available to employer each year. This theory simply means that if the employer has no enough money at the end of the year, then it pay less to the employees, while if the employee has a lot of money at the end of the year then employees can get more. Of all these theories has been formulated but non from all of them that guaranteed an optimum solution to the problem of how should wages are determined and what should really be the basis for paying employees. However, each of them has lead for the employer to develop an effective way of paying their people. In other words based on these theories companies formulated strategies on how they could pay their people. Some pay their people by qualification, others pay their employees based on performance, while some others pay their employees according to the skills and knowledge he is to used in his job and some others used the combination of these.

Citing those theories above organizations devised some methods of delivering compensations which is called the compensation system. This system to be effective, it should be secure, balance, cost-effective, and acceptable to employees. Its common that most employers pay different rates to employees performing the same job since every employee have different experience, skills and performance, while others still considers seniority as a factor in determining the employees pay. Employees are paid for the time they work as mentioned in this paper, while they can also be paid according to the output they produce, the skills they possessed, their knowledge, competencies or a combinations of these. When paying an employee based on performance, normally performance is variable as for an instance, a high performer of this month may not be the high performer for the next month, therefore; with variable pay system, a percentage of an employee’s paycheck is at risk which means that from the example I cited, the high performer at this month when he perform low next month will not get the same compensation, if she gets P20,000.00 of this month then next month he might get less, lets say P15,000.00. However variable pay is only a component of the total compensation which aside from variable pays it includes the base pay, and the indirect pay. Variable pay helps manage labor costs however it does not guarantee equitable treatment of employees it may lead to productivity decline since financial security on the employees side is not secure. This may serve as a non-motivating factor.

Aside from the base pay, variable pay, there is what we call benefits. Benefits are group membership rewards that provide security for employees and their family members. These benefits are used to safeguard the employee and their families against problems due to sickness, accidents, or retirement. It is believed that it is a powerful tool for recruiting. There are legally required benefits such as health insurance, retirement; insurance and etc. there are also To make benefits to be effective it should be aligned to the organizations compensation strategy by considering what benefit mix to be used, the amount of the benefit and the flexibility of the benefits. Recently more and more organizations offered the cafeteria plans.

 Cafeteria plans are fringe-benefit plans that allow employees to choose the benefits they want from their employer, including cash in lieu of other benefits. Employees may choose among a variety of taxable benefits, such as cash, or nontaxable benefits, such as health coverage. The basic requirements of cafeteria plans are that they be in writing, give employees choices among cash and other benefits, and not discriminate in favor of highly paid employees. A plan must offer at least one taxable benefit and at least one nontaxable benefit. One advantage of this type of plans is that both employer and employee receive certain tax advantages (which may not be as important for nonprofit organizations as for for-profit companies). Another is that employees have the freedom to choose cash instead of unwanted or unneeded benefits. By offering a cafeteria plan, it may be easier to shift more of the cost of employee benefits to the employees.

 On the other hand, there is what we call rewards and incentives which are positive motivational influence that can sometimes be equated or synonymously called as bonus: which is an additional payment (or other remuneration) to employees as a means of increasing output. Incentive pay systems include incentive plans that provide financial or non-financial rewards to employees who make substantial contributions to organizational effectiveness. Some plans tie rewards to the output of individual employees, others reward the productivity of groups but, still others are based on the overall profitability of the organization.  They are designed to encourage employees to achieve specific organizational goals, such as increasing profits, lowering costs, raising productivity, improving product quality. Some organizations have two or more incentive plans operating simultaneously, such as an individual bonus scheme plus an organizational wide profit sharing plan.
Not to mention my report on job analysis provides me insights that it is not the person or the employee being analyzed when doing a job analysis. Instead it is the job which is being analyzed by collecting data about the job using the information from the current position holder, maybe by interview or a structured questionnaire. Job analysis helps to uncover facts about the job, about the training needed by the employees, on how much an employee must be paid performing the job being analyzed, or it can be used in job screening activities. By doing job analysis, the manager can determine what skills are needed to fill the vacant positions. It is also useful in performance review, because by job analysis, job performance can be set. Any performance fall below the standard or the expected performance may lead to knowing that the position holder is not doing well with the job.

Another thing I learned in this course was the making of my own Performance Appraisal Form which was for me a very stressing activity. This is because even though I know the facts about appraisal systems but applying those facts and theories into making one is a very difficult task. I am so glad I made one.

The course really provides me knowledge on the necessary things I should learn being a student of Masters in Business Management. I believe everything I learned from the class cannot be contained in a five sheets of paper. There are more to tell and to relate. However, I am patience enough to reserve this learning and eager enough to practice it when due time comes.

1 comment:

  1. I certainly agree to some points that you have discussed on this post. I appreciate that you have shared some reliable tips on this review.