2023 Compensation & Benefits PDF

TOPIC 5: COMPENSATI ON & BENEFITS MGT340 HUMAN RESOURCE MANAGEMENT Edited by Dr. Rabiatul Adawiyah  DEFINITION COMPENSATION Refers to all form of pay or rewards going to employees and arising from their employment. The compensation package includes...

TOPIC 5: COMPENSATI ON & BENEFITS MGT340 HUMAN RESOURCE MANAGEMENT Edited by Dr. Rabiatul Adawiyah  DEFINITION COMPENSATION Refers to all form of pay or rewards going to employees and arising from their employment. The compensation package includes wages, incentive, bonus and rewards which can be divided into i.Direct financial payment, ii.Indirect financial payment & iii.Non-financial payment  TYPES OF COMPENSATION Direct Financial Payment Wages/salaries, incentive/commission, bonuses Indirect Financial Payments Insurance coverage, paid vacation Non-Financial Reward is given to employees that have no monetary value but provides the same amount of satisfaction as monetary compensation Flexible work scheduling, onsite gyms  Wages/salaries Cash payments paid to employees on regular basis in return of their labour Major system of payment: Time related systems Piece rated system Incentive/commission Direct Paying for performance Financia Individual incentive programs give performance- based pay to individual employees. l Example: Incentive for salesperson Payment Incentives for managers & executives Bonus The extra payment or financial component which is received as a reward for doing one's job well  WAGE SYSTEMS Time-related system Wages are paid for a set period of work on an hourly, weekly or monthly basis. No direct relationship between an employee’s productivity and his performance. A worker who works hard will receive the same salary as another worker who does little. For instance, a full time employee who receives RM4,000 per month salary or a part-time worker who is paid RM4.00 an hour would still receive the payments even though they are slacking in their jobs for any particular period. Advantages: Easy to understand and administer, provides steady income  WAGE SYSTEMS Piece-work/piece related system/payment by results Worker are paid according to the number of units produced in a given time. a) Strait piece-rate system For example, in a clothing factory, if a worker is paid RM20 for each blouse she sew, the worker will be paid a total of RM2000 if he is able to sew 100 pieces of blouse for the month. b) Differential piece-rate system In this system the employee is paid one piece-rate wage for units produced up to a standard output. The employee would be paid a higher piece-rate wage if he produced units over the standard. For example, a company set a standard quota for a worker to produce 300 units per month and the standard rate is RM5 per unit, and for all units over the standard, the worker is paid RM10 per unit. If the worker produces 400 units in one month, he would be paid (300 x RM5) + (100 x RM10 ) = RM2,500 tor that month.  Other forms of compensation not including direct financial payment Indirect Financial Payment Most of benefits offered by & Non- employer are in the form Financial of indirect financial payments & non-financial  WORKING HOUR SYSTEMS IN MALAYSIA Normal Working Hours Overtime Previously, workers in Malaysia had a Working longer hour than normal maximum number of weekly working working hours (8 hours/day, 45 hours of 48 hours — which roughly hours/week) equates to around 8 hours per day, 6 Overtime rates: days a week. i.Ordinary working day = 1.5 times However, from 1st January 2023, this the normal hourly rate maximum number has now been ii.Rest day = 2 times the normal hourly reduced to 45 hours per week rate (excluding meal time) iii.Public holiday = 3 times normal Employee shall not be required under hourly rate his contract of service to work: i.More than five consecutive hours without a period of leisure of no less than thirty minutes. ii.More than eight hours in one day. iii.[Section 59 (1)] Employees shall be allowed each week a rest day of  WORKING HOUR SYSTEMS IN MALAYSIA Shift Work Flexitime Part Time Hours of works is System of working Part time working refers to outside normal working hours where the the number of hours- hours pattern starting and stopping usually calculated per Two or more groups of times are decided by week that an employee workers take turn to man individual worker within is required to work the workstations a number of limitation Part time worker either Example of shift work: by the employer. temporary or i.Double day shift: 16 Flexitime terminology: permanent working hours working (2 groups i.Bandwidth: Organization hours must be less than working 8 hours each) daily opening hours the normal hour. ii.Three shift work: 24- ii.Core hours: Mandatory Employment Act defines hour operation hours for all workers part timer average hours (continues/semi iii.Flexibands: Period should not exceed 70% continuous) before/after core hours, of normal hours of a full iii.The split shift: Worker workers can choose time workers. have breaks between 2 iv.Settlement period: shift in same day Total required hours in a  TYPES OF BENEFITS Certain benefits are statutorily required by (Employment Act 1955, the Sabah and Sarawak Labour Ordinances, EPF Act, SOCSO Act and the Insurance System Act 2017 Types of benefits: Statutory benefits: Mandatory benefits employers required to provide to their employees by law Non-statutory benefits: Optional benefits may be provided by employers to employees, often differing by employee level (management vs operator)  1) Maternity Leave Every female employee is entitled to maternity leave of 98 days (new employment Act https://althr.my/resources/employment- act-1955-amendments-2022-malaysi) Previously (only 60 days for every Statuto confinement, maximum 90 days) ry During the maternity leave, maternity allowance is payable to the Benefit employee providing she has NO more than 5 surviving children and she s 2)served Paternity days leave for at least 90 the employer Fatherbefore givingisbirth. in Malaysia now entitled to 7 days paternity leave and limit to only five children irrespective of the number of spouses, must legally married and  3) Rest Day A weekly rest day Section 59 of Employment Act stipulates that all employees are entitled to one rest day per week. 4) Public Holidays Section 60 entitles all workers covered by Statuto Employment Act 1955 / SLOs to a minimum of : 11 paid gazetted public holidays per year (Peninsular Malaysia), ry 14 days (Sabah) 16 days (Sarawak). Benefit Five of the holidays are specified by the Act and must include: s National Day The Yang di Petuan Agong’s Birthday The State Ruler’s Birthday Labour Day Malaysia Day  5) Annual Leave The Employment Act provides that paid annual leave shall be given as follows: Less than 2 years: 8 days leave per Statutor year 2-5 years: 12 days leave per year y More than 5 years: 16 days leave per year 6) Sick Leave Benefits Employees are entitled to paid sick leave, be given as follows: Less than 2 years: 14 days per year 2-5 years: 18 days leave per year More than 5 years: 22 days per year If an employee is hospitalized, he can take up to 60 days of sick leave per year.  7) Contribution to Employees Provident Fund (EPF) Statutory Objective: To ensure that every worker has sufficient Benefits funds to sustain him once he has retired upon reaching the minimum retirement age of 60. Currently, employees are permitted to withdraw their EXAMPLE: savings from the fund at the age of 55, even though Basic salary : RM1000 they are working. EPF : employee (11% - Statutory contribution: 2nd account) : RM110 Employees (Below 60 years old)- 11% Employers – 12% EPF : employer (12% - 1st account) : RM120 Employees who are not required to become members of EPF: SOCSO : employee (0.5%) Domestic servants of monthly wages Foreign workers Total net salary: Government servants on a pension scheme RM1000 – RM110 –RM5 = There are provision for the self-employed, partners RM885 in a business, sole proprietors, pensionable employees in public sector & foreign workers to contribute if they wish. They must pay a minimum or RM50 per month to the Fund. They also can choose to pay any amount above this up to RM5,000 per month as  8) Contribution to Employees Social Security Organization (SOCSO) To provide employees with compensation and financial benefits should they be involved in an accident at work, contract an occupational Statutory disease or become an invalid (from whatever cause). Benefits Employment Injury and Invalidity Schemes (Below 60 years old): Employer (1.75%) & Employee (0.5%) of monthly wages Employment Injury Scheme (60 years old and above & still working): 1.25% of the employee’s monthly wages solely borne by the employer. Main Benefits: Medical benefits for employment injuries, disablement benefits, invalidity pension, funeral benefits, provision of prosthetic appliances, and rehabilitation facilities.  Non-statutory Benefits 3) Insurance 1) Time-off 2) Health 4) Financial (other than payments: Care: services: SOCSO): Marriage Becoming a Employers Loans to buy Personal valuable commonly buy houses, cars emergencies benefit to life and and other Pilgrimage (30- employees accident items such as 40 days) with the rising insurance computers Studies cost of medical group policies, may be given Death of a care. which are to employees, Payment of usually usually with relative (3 combined with interest rates days) medical bills Hospitalizatio medical lower than n benefits benefits, to those Payment of protect their charged by employees the banks optical bills Payment of dental bills  Non-statutory Benefits 5) Retirement 6) Educational 7) Subsidies and benefits assistance Services Some employers Companies may set Canteens are willing to pay a up libraries of Transportation to higher reading materials and from work contribution to and computer- Childcare facilities EPF on behalf of readable files to Club membership their employees. encourage workers and accommodation Large organizations to develop at holiday resorts may establish themselves. Quarters for the special retirement Companies may also staffs funds as an extra to can pay fees if Renting/provide the EPF. employees wish to attend any hostels for young training courses. female or foreign Scholarships may workers Air Asia and also be offered to employees if they Malaysia Airlines want to further their offer free flight THE IMPORTANCE OF BENEFITS Help attract staff to join the organization Help retain existing employees Increase morale of employees, which may lead to higher productivity  REWARDS SYSTEMS Objective of Incentives and rewards: Drive behaviour to higher levels Create competition Help to retain the best performers To be effective, reward schemes must: Allow many employees to be winners Be perceived as fair Drive suitable behaviours Be perceived as attractive Types of rewards: Financial Non-financial  1) FINANCIAL REWARDS Wage increments  Salary of employees increase due to their good performance.  This may motivate them to work harder. REWARD Bonuses  It is a lump sum of money awarded for S outstanding performance in any activity which the organization wants to encourage. Profit-sharing schemes  It is a plan that gives employees a share in the profits of a company. Under this type of plan, an employee receives a percentage of a company's profits based on its quarterly or annual earnings. Commissions  Salespeople have reward systems which are different to that provided for other employees in  2) NON-FINANCIAL REWARDS Performance awards Employers recognize the value of performance awards which can be given for a variety of special achievements such as Worker of the Month, Most Promising REWARD Executive Letters of appreciation S Praise in term of writing, oral in public or privately can be source of employee satisfaction. Long service awards Employers valued loyalty and recognized long service with some token of appreciation. Ex: gold watch, a gold bar, a trip overseas, special dinner event Sponsorship to attend conferences