A)

Labor Market Conditions B) Legislation C) Collective Bargaining Agreement (CBA) D) Organizations Ability to Pay

a) Labor Market Condition

TIGHT MARKET- if the demand for certain skills is high while the supply is low, there tends to be an increase in the price paid for the skills. LOOSE MARKET- If the supply of labor is plentiful, relative to the demand for it, wages tend to decrease.

b) Legislation

Philippine Labor Laws

Chapter II Article 99/100/101/123/124 Minimum wage rates

Under Philippine law, wages are remunerations or earnings for services rendered. Employers and employees may agree on rate but should not fall below the minimum wages set by the Regional Tripartite Wages and Productivity Boards (RTWPB) which has jurisdiction over the place of work

The pay of employees is intended to be given whole to the employee in Philippine legal tender. So while payment by check and through automated teller machines (ATMs) are allowed, vouchers, promissory notes and gift certificates are not. Deductions from employee wages are generally frowned upon with only a few allowed by law including income tax, contributions to social welfare agencies such as SSS and Pag Ibig, and union dues under appropriate agreements.

The normal hours work of an employee shall not exceed 8 hours a day. However, Health Personnel shall have a maximum of 40 hours a week. If made to work in excess of 40 hours, they are entitled to 30% additional pay.

So called Compensable Hours include all time during which an a) employee is required to be on duty, to be at employers premises or prescribed place or b) all time during which an employee is suffered or permitted to work.

Yes. The law sets a maximum number of hours but does not prohibit work done less than eight hours. Thus, part-time work is allowed and pay corresponding to the actual hours worked will be paid.

The wage and benefits of a part-time worker are in proportion to the number of hours worked. Assuming that he should be earning P400.00 for an eight-hour work, he shall then get P200.00 for work done in four hours.

Overtime Work is work rendered beyond 8 hours. Every hour worked in excess of 8 hours earns an additional pay of P25%. The rate is 30% if done on a rest day or holiday.

No, the law prohibits offsetting overtime with undertime on another day. The hourly rate of overtime is higher than the hours missed in case of undertime.

Generally, everyone is covered by the law on overtime. However, the following have been exempted by the law: managerial personnel, government employees, non agricultural field personnel whose hours of work cannot be determined, family members dependent upon the employer for support, househelpers, those in the personal employ of another, and piece rate workers.

Yes. Under the Labor Code, every employee shall be paid a night shift differential of not less than 10% of his regular wage for each hour of work performed between 10:00 p.m. and 6:00 am the following day.

What is a weekly rest day? It is the required rest period of not less than 24 consecutive hours after every six normal workdays. Who chooses the rest day? The employer shall determine the weekly restday. However, the employer shall respect the preference of employees as to their weekly restday when such preference is based on religious grounds.

How much is the pay for work on a rest day? The compensation is the regular wage plus 30% thereof. How much is work on a Sunday paid? The compensation is the regular wage unless Sunday happens to be the rest day of the employee. If Sunday is the rest day, the employee shall be entitled to the additional 30% pay.

Minimum Wage Earners Exempt from Income Tax A new law passed in 2008 exempts minimum wage earners from paying income taxes. Because of this, no deductions will be made from their pay on the basis of income tax.

What is Holiday Pay? Holiday Pay refers to pay received by an employee on the occasion of a regular holiday or special day. In the case of regular holiday, the employee is paid even if she did not work. She receives double her pay if she works on a regular holiday. In the case of a special day (see below), the employee is not paid if she does no report for work. But if the employee works on a special day, she is entitled to 130% of her usual pay.

New Years Day (January 1) Maundy Thursday (movable) Good Friday (movable) Araw ng Kagitingan (April 9 - or nearest Monday) Labor Day (May 1 - or nearest Monday) Independence Day (June 12 - or nearest Monday) National Heroes Day (Last Monday of August) Bonifacio Day (November 30 - or nearest Monday) Eid ul-Fitr (movable) Eid-Ul-Adha (movable) Christmas Day (December 25) Rizal Day (December 30 - or nearest Monday)

We have 3 special days: November 1 (All Saints Day) December 31 (Last Day of the Year) August 21 (Ninoy Aquino

January 1 - New Year's Day (Tuesday) March 28 - Maundy Thursday March 29 - Good Friday April 9 - Araw ng Kagitingan (Tuesday) May 1 - Labor Day (Wednesday) June 12 - Independence Day (Wednesday) August 26 - National Heroes Day (Monday) November 30 - Bonifacio Day (Saturday) December 25 - Christmas Day (Wednesday) December 30 - Rizal Day (Monday)

March 30 - Holy Saturday August 21 - Ninoy Aquino Day (Wednesday) November 1 - All Saints' Day (Friday) November 2 (Saturday), December 24 (Tuesday) - Additional non-working days December 31 - Last day of the year (Tuesday) The Edsa Revolution anniversary, February 25 (Monday), will be a special holiday for schools.

Art. 99. Regional minimum wages. The minimum wage rates for agricultural and non-agricultural employees and workers in each and every region of the country shall be those prescribed by the Regional Tripartite Wages and Productivity Boards. (As amended by Section 3, Republic Act No. 6727, June 9, 1989).

Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.

Art. 101. Payment by results. The Secretary of Labor and Employment shall regulate the payment of wages by results, including pakyao, piecework, and other nontime work, in order to ensure the payment of fair and reasonable wage rates, preferably through time and motion studies or in consultation with representatives of workers and employers organizations.

c) Collective Bargaining (CBA)

Negotiation between an employer and a labor union usually on wages, hours and working conditions. Collective Bargaining affects two key factors
(1) The level of wages (2) The behavior of workers relevant labor markets.

d) Organizations Ability To Pay

The organizations ability to pay depends to a large extent on the competitive dynamics it faces in its product or service markets. Therefore regardless of its espoused competitive position on wages , an organizations ability to pay ultimately will be a key factor that limits actual wages. This is not to downplay the role of management philosophy and attitudes on pay. On the contrary, managements desire to maintain or improve morale, attract high caliber employees, reduce turnover and improve employees standards of living also affect wages, as does the relative importance of a given position to a firm.

OBJECTIVE

The broad objective in developing pay systems is to assign a monetary value to each job in the organization (a base rate) and an orderly procedure for increasing the base rate (ex. Based on merit, inflation, experience or some combination of those) To develop a pay system, we need four basic tools.

A)

Updated Job Description B) Job Evaluation C) Pay Surveys D) Pay structures

Job Description are key tools in design of pay systems and they serve two purposes:

1. They identify an important characteristics of each job so that the relative worth of jobs can be determined. 2. From them we can identify, define and weight Compensable Factors
Factors- common job characteristics that an organization is willing to pay for such as skill, effort, responsibility and working conditions.

Compensable

JOB EVALUATION

Objective: To rank jobs in terms of their relative worth to the organization so that an equitable rate of pay can be determined for each job.

POINT METHOD JOB EVALUATION

Each job is analyzed and defined in terms of compensable factors and organization has agreed to adopt. Points are assigned to each level (or degree) of a compensable factor, such as responsibility. The total points assigned to each job across each compensable factors are then summed. A hierarchy of job worth is therefore defined when jobs are rank-ordered from highest point total to lowest point total.

RELEVANT LABOR MARKET REQUIRES TWO KEY DECISIONS.

Which Job to survey Which markets are relevant for each job

Survey are available from variety of sources

Government (Bureau of labor statistics) Employers Associations (ECOP) Users of a given job evaluation systems Compensation consulting firms

The final step in attaching monetary values to jobs using the point method is to establish pay grades, or ranges, characterized by a point spread from minimum to maximum for each grade. Starting wages are given by a trend line that represents the minimum rate pay grade, while the highest wages that can be earned within a grade by a trend line that represent the maximum rate of pay.

GRADE

POINT SPREAD 62-75 76-91 92 -110 111-132 133-157 158-186 187-219

MIDPOIN T 68 83 101 121 145 172 203

MINIMUM RATE OF P62AY $7.50 8.63 9.92 11.41 13.12 15.09 17.35

MAIMUM RATE OF PAY $9.75 11.21 12.90 14.83 17.06 19.62 22.56

2 3 4 5 6 7 8

9
10 11 12

220-257
258-300 301-350 351-407

238
279 325 379

19.95
22.95 26.39 30.35

25.92
29.83 34.31 34.45

Job of the same general value should be clustered into the same pay grade. Jobs that clearly differ in value should be in different pay grades. There should be a smooth progression of point groupings The new system should fit realistically into the existing allocation of pay within the company. The pay grade should conform reasonably well to pay patterns in the relevant labor markets

Once such pay structure is in place, the determination of each individuals pay (based on experienced, seniority, and performance) becomes a more systematic, orderly procedure.

a) b)

c)
d)

e)
f)

Merit Pay System Incentive for executives Incentives for lower level employees Union (Collective Bargaining Agreement) (CBA) Team Incentives Organizationwide incentives 1. Profit sharing 2. Gain sharing 3. Employee Stock Ownership Plans (ESOPs)

Reasons merit pay systems fail

Rewards are too small

Merit-based pay fails to match union pay scale

Supervisors resist
performance

Links between
performance

appraisal

and rewards are weak

Annuity feature create problems

Merit pay systems that work

Establish high standards of performance

Develop accurate performance appraisal systems

Teach supervisors how to do appraisals and how to give feedback

Link rewards closely to performance

Use a wide range of increases

Team incentives have the following advantages: 1.They make it possible to reward workers who provide essential services to line workers(so-called indirect labor), yet who are paid only their regular base pay. These employees do things like transport supplies and materials, maintain equipment, or inspect work output. 2. They encourage cooperation, not competition, among workers. On the other hand, team incentives also have disadvantages: 1. Competition between teams 2. Inability of workers to see their individual contributions to the output of the team. If they do not see the link between their individual effort and increased rewards, they will not be motivated to produce more. 3.Top performers grow disenchanted with having to carry free riders (those who dont carry their share of the load).

Profit sharing plans pay out if a firm meets its profitability target (e.g., return on assets or net income). Profit sharing can be either deferred (i.e., to fun retirement) or paid in cash, while payouts may be either formula-based (e.g., a fixed percentage of net income) or discretionary. Firms use it for one or more of the following reasons: To provide a group incentive for increased productivity To provide retirement income for their employees To institute a flexible reward structure that reflects a companys actual economic position To enhance employees security and identification with the company To attract and retain workers more easily To educate individuals about the factors that underlie business success and the capitalistic system.

Gain sharing is a results-based program that generally links pay to performance at the facility level. In contrast to profit sharing where many employees cannot see the link between what they do and company profits, gain sharing focuses on achieving savings in areas over which employees do have control for example, reduced scrap or lower labor or utility costs. As the name suggests, employees share in the gains achieved. Gain sharing is a reward system that has existed in a variety of forms for decades.

1. Gain sharing is based on a measure of productivity. Profit sharing is based on a global profitability measure. 2. Gain sharing, productivity measurement, and bonus payments are frequent events, distributed monthly or quarterly , in contrast to the annual measures and rewards of profit-sharing plans. 3. Gain sharing plans are current distribution plans, in contrast to most profit-sharing plans, which have deferred payments. Hence gain-sharing plans are true incentive plans rather than employee benefits. As such, they are more directly related to individual behavior and therefore can motivate worker productivity.