Rewards: Compensations And Benefits Services PDF

REWARDS: COMPENSATIONS AND BENEFITS SERVICES 1   Define and explain importance of employee rewards.  Differentiate between monetary rewards and CHAPTER non-monetary rewards. OUTLINE  Explain the steps in establishing wage mix....

REWARDS: COMPENSATIONS AND BENEFITS SERVICES 1   Define and explain importance of employee rewards.  Differentiate between monetary rewards and CHAPTER non-monetary rewards. OUTLINE  Explain the steps in establishing wage mix.  Explain the Benefits and Services. 2  All forms of pay or rewards going to employees and arising from their employment. COMPENSATIONS Reward that individuals receive in return for their labors. 3  1. Attract qualified 6. To reward desired manpower to joint the behavior to ensure positive company. attitude towards 2. Reduce unnecessary organization’s goals. turnover. 7. To reward employees past performance. 3. To retain and improve 8. To remain competitive in loyalty of current the labor market. IMPORTANCE employees. 9. To maintain salary equity 4. To encourage among employees. motivation by providing 10. To mesh employees’ a system that able to future performance with improve satisfaction. organizational goals. 5. To make sure the 11. To control the compensation system compensation budget. that comply with legal requirement. 5  1. Financial Compensation Refers to reward received by employees in term of money which can be direct (wages, salaries, commissions, bonuses) or indirect (many benefits supplied by employers; retirement program, social security, insurance, vacation). 2. Non Financial Compensation Refers to programs that are established by employers to satisfy TYPES OF employees in term of job content and job context (Job Design) – COMPENSATION can form and maintain stronger relationships with their employees Eg: Job enlargement, job enrichment, job empowerment, autonomy, recognition, advancement and award, job flexibility. The financial compensation is the main reason and initial motivator for every employees thus fulfilling the physiological needs but the non financial compensation is what makes the job more interesting and promising.  6 Compensation Components 7 Compensation Alignment 8  COMPENSATION STRATEGY Analyzing organizational objectives Identifying appropriate market rates to pay employees 9–9  1. To reward employees past performance 2. To remain competitive in the labor market 3. To maintain salary equity among employees Linking 4. To attract new employees compensation 5. To reduce turnover to 6. Pay strategy: organizational Pay rate is above, below or at the objectives prevailing market rate Employees’ acceptance which increase motivation 9–10   Compensation linked to employee’s relative performance  Motivating employees through compensation  Pay represents reward received in exchange for employees’ contribution The pay for  Pay equity performance  Establish distributive fairness standard  Avoid inequity feeling  Expectancy theory and pay  Effort lead to high in performance, high performance should results in rewards valuable by employees 11   Generally, employees can be paid on an hourly or salaried employees 1. Hourly Work –Work paid on an hourly basis; time sheet –construction, maintenance 2. Piecework –Work paid according to the number of units BASES OF produced. –Plant operators, a food production company COMPENSATION may pay its packaging staff a set amount for every item they securely wrap and package. 3. Salary Workers –Employees whose compensation is computed on the basis of weekly, biweekly, or monthly pay periods. –Public service employees 12  COMPENSATION STRATEGY – PAY MIX You want to attract, motivate and retain good employees. The problem with what you have is that it is not very complete. In other words, how will you accomplish this goal? One way might be placing very sticky paper on the entrance to the building, so that every one who walks by will be stuck. Maybe while they are trying to get unstuck, you could put them to work, or at least try to convince them that working for you would be a wonderful thing. 9–13 Factors Affecting the Pay Mix 14  COMPENSATION STRUCTURE Salary structures are an important component of effective compensation programs and help ensure that pay levels for groups of jobs are competitive externally and equitable internally. A well- designed salary structure allows management to reward performance and skills development while controlling overall base salary cost by providing a cap on the range paid for particular jobs or locations. 9–15   Reasons – to establish pay equity & distributive justice.  A survey of the wages paid to employees of other employers in the surveying Wage and organization’s relevant labor market. Salary survey  Local, regional and national  Helps maintain internal and external pay equity for employees.  Labor Market (The area from which employers obtain certain types of workers). 16   A formal and systematic comparison of jobs to determine the worth of one job relative to another  Jobs that require greater qualifications, more responsibilities and more complex job duties should receive more pay than jobs with lower requirements.  Compensable factors – skills, effort, responsibilities, working conditions  Hay Consulting Firm – know how, problem solving, accountability Job Evaluation for executive, managerial & professional groups.  Job ranking method – ranks each job relative to all other jobs (Jobs and their duties and responsibilities, in order of the importance).  Point method – a quantitative job evaluation procedure that determines the relative value of a job by the total points assigned to it.  Job classification system – jobs are classified and grouped according to a series of predetermined wage grades. 17  –An outcome of job evaluation –A curve in a scattergram representing the relationship between relative worth of jobs (x- axis) and wage rates (y – axis). –The rates paid for job within the organization and by other organizations The wage curve y-axis X-axis 18 Pay Grades 19  Rate Ranges Job Salary Band @ Pay Grades Rate Ranges Code Job Title (RM/per month) (RM/per month) a. Marketing RM7500 b. Finance RM7300 E001 Senior manager 7000 upwards c. Operation RM7200 d. HRM RM7000 a. Civil 2500 2500 – 5000 E004 Engineer b. Mechanical 2600 (Min to Max) c. Electrical 2700 Company 1600 – 3500 E006 secretary (Min to Max) 1500 – 3000 a. Operation 2600 E007 Executive (Min to Max) b. Human Resource 2500 Note: E002 = Manager (Min RM6000- Max RM6999) E003 = Senior Engineer (Min RM5001- Max RM5999) 20  Compensation Management and Other HRM Functions Supply of applicants Aid or impair recruitment Recruitment affects wage rates Selection standards affect Pay rates affect selectivity Selection level of pay required Training and Increased knowledge leads Pay can motivate training Development to higher pay Training and development may Compensation A basis for determining lead to higher pay Management employee’s rate of pay Low pay encourages Pay rates determined Labor Relations through negotiation unionization 21 Benefits and services 22  Definition:  An indirect form of compensation intended to improve the quality of the work lives and the personal lives of employees.  Indirect financial payment, given to employees. They may include health and life insurance, vacation, pension, education plans and discount on company Benefits products.  Originally referred to as fringe benefits.  Two (2) Types of Benefits: –Mandatory Benefits (required by law). –Non Mandatory Benefits (Discretionary). 23  1. Initially benefits were used to promote and reward employee loyalty and to discourage unionization. 2. Today most employers view benefit as part of the total compensation package and employees regard them as earned compensation. 3. Benefits cost the firm money, but employees usually receive them indirectly. Benefits 4. Benefits are commitments, which may or may not be compelled by law to be given to an employee. Generally, they are given by an employer to demonstrate employment goodwill (kindness or concern) and to meet employees’ expectations. It is vary from one employer to other employer. 24  ▪ Improve employee work satisfaction ▪ Meet employee health and security requirements ▪ Attract and motivate employees ▪ Reduce turnover Objectives of ▪ Maintain a favorable competitive position ▪ Retain current employees benefits ▪ Comply with legal requirement programs ▪ Improve morale ▪ Retain top performers ▪ To promote and reward employee loyalty ▪ Discourage unionization 25  1. The size of the firm.  Bigger organization will give more BS than smaller organization.  Small organization will provide basic BS Factors To Be 2. Cost containment (control). Considered In  The organization sets the dollar maximum to the Developing employees within their constraints. Benefits And  Rising costs of providing benefits. 3. Degree of unionization. Services (BS)  Need to lower the degree of unionization. Plan 4. Profitability.  If profit higher than expenses, more BS can be provided. 26 Requirement 1. Allowing for employee involvement s for a Sound 2. Benefits for a diverse workforce Benefit 3. Providing for flexibility Program 9–27   Benefit plans that enable individual employees to choose the benefits that are best suited to their particular needs.  The employer may make further contributions to the plan (in addition to an employee’s own salary redirections) which employees may also use to purchase benefits. Providing for  These benefits may include dependent care assistance programs (day care), uninsured medical expenses not flexibility covered by the typical group medical plan, group life and medical and disability premiums otherwise paid by the employee.  Because cafeteria plans allow employees to choose the benefits they want, they are often referred to as flexible spending or flexible benefit plans. 28  Benefits Statutory / Non-Mandatory / Mandatory / Types of Compulsory Discretionary (Optionally Offered) (Legally Required) employees benefits Allowance EA 1955 Compassionate Leave Pension Insurance Plan EPF 1991 Educational Facilities SOCSO 1969 Financial Services Medical Payment etc 30   It is an obligatory payment to compensate the job holders in the performance of work which is deemed necessary for which the basic pay does not cover.  These benefits are legally required: Mandatory  Employment Act, 1955 benefits  Pension Act.  Employees Provident Fund Act (amended 1991).  Workers Social Security Act, 1969. 31  1. Employers must give certain benefits to employees who are covered by the act (contract of service, payment of wages, foreign employees). 2. The Employment (Amendment) Act 2022 has come into effect on the 1st of January 2023— along with some key changes to the First Schedule which defines employees who will be Employment covered by EA 1955.  EA 1955 now covers ALL employees irrespective of wages Act 1955  Flexible working arrangements are now provided for in the Act  Change in maximum working hours for workers – 45 hours max  Increased (paid) maternity leave for mothers – 98 days  The introduction of (paid) paternity leave – 7 days  Protection for pregnant mothers against termination 32  1. Particularly those earning less than RM2000 a month. 2. Maternity protection (maternity leave for a period of not less than 60 days for every confinement period & < 5 children). Employment 3. Compulsory Time-off payments Act 1955  a weekly rest day (1 rest day per week) – agreed upon by employee and employer. (previous  public holidays (10 days): 4 days (National Day, section) Agong’s Birthday, State Ruler’s Birthday & Labor Day and other 6 days mutually agreed between the employer & employee. 33  – annual leave (8 days for service < 2 years), (12 days for service < 5 years) & (16 days for service > 5 years) – sick leave (without hospitalization) Employment (14 days for service < 2 years), Act 1955 (18 days for service < 5 years) & (22 days for service > 5 years) – Sick leave (hospitalization) 60 days and must be certified by registered medical practitioner or panel doctor. 34   Applicable to government servant who opt for pension and surrender his/her savings in EPF after confirmation in service.  Under the Federal Constitution, pension is the responsibility of the Federal Government as provided under Article 74, 9th Schedule, List I, Para 6(d) Federal List.  Non-contributory scheme - without any contributions from employees and only partial contributions from employers throughout the entire period of their service  Pensionable employees in the public sector are entitled to an array of Pension act benefits that comprise:  (1) retirement benefits (a monthly pension and a gratuity as well as a 1980 cash award for accumulated leave),  (2) survivors' benefits (derivative pension and derivative gratuity as well as dependent's pension), and  (3) disability pension.  Payment of pension will be paid after an individual reach compulsory retirement at the age of 56 or 58 (following new government circulation year 2008). Now, 60 since 2010.  Payment will be made on monthly basis. 35  1. As a form of compulsory savings system for workers so that they would not be impoverished and dependent on the state once they retired from the workforce - To ensure every worker has sufficient fund to sustain their life once they retired. 2. Every employer is required to register with the EPF Board on setting up a business. 3. All employees are liable to pay monthly contributions to the fund at the rate of 11% of their wages. 4. Employers are required to deduct this amount from their Employees employees’ wages and pay it on their behalf to the fund along with the employer’s contribution of 12% of the workers’ Provident monthly wages. Fund Act 1991 5. Employers must pay the contributions according to the rate set out in the Third Schedule of the EPF Act 1991 and should not do their own calculations. 6. The EPF Account Restructuring is aimed at enhancing members’ retirement income security while addressing their current life cycle needs. Under this initiative, members’ accounts will be restructured from two (2) accounts to three (3) accounts – Akaun Persaraan, Akaun Sejahtera, Akaun Fleksibel (Corporate Unit – 24 April 2024) 36  1. To provide employees with benefits when employees involved in an accident at work, contract an occupational decease or become an invalid. 2. All employers are required to register with SOCSO. 3. Employees who earn less than RM 4000 - 5000 per Employees month are required to contribute. Social Security 4. The monthly rates are 1.75% (employer’s Act 1969 contribution) and 0.5% (employee’s contribution)(Rate of contribution for Employees’ Social Security Act 1969 (Act 4)) 5. Protection - Employed Worker, Foreign Worker, Domestic Workers, Self-Employed, Housewife 37 Non Mandatory Benefits (Discretionary Benefits) 38   They are often given to the jobholder in recognition of the status and function of the Discretionary position. Because they are discretionary, they Benefits can be withdrawn by the management depending on the circumstances affecting the (Non- position or the organization. More often than mandatory not, once given, they are difficult to withdraw. Benefits)  Offered voluntarily by the organization. 39  Allowances (travel,  Car allowance. meal, housing). Housing loans.  Entertainment. Meals.  Family health care. Healthcare benefits  Insurance plans. Types of Non (dental, optical, mental health).  Retirement plans. Mandatory Additional Time Off  Vacation. Benefits Payment for time not worked (vacations with  Social Services. pay, paid holidays).  Financial Services. Life insurance. Recreational Facilities.  Educational Facilities. Compassionate Leave. 40   There has been an increasing number of services designed to make life at work more rewarding and to enhance the well-being of employees. Employees  Today employers are trying to create a Services work/life environment by offering a host of employee services designed to balance employee work and personal needs. 41  –Employee assistance program: Provide counseling, diagnosis and referral for advice and treatment for a wide variety of problems confronting employees. Alcohol, drug, marital and family problems. Employees –Child and elder care Services –Other services: Food services, Transportation pooling, Recreational and social services, Awards, Legal services, Financial planning. 42   For employers, the administration of an employee benefits program can be a time consuming and costly.  Even for small employers, keeping track of each employee’s benefit package with many changes is cumbersome.  For both small and large employers, there is a wide choice of HRIS And commercially developed computer packages that greatly Employees facilitate benefits management.  With an interactive, on-line benefits programs employees can Benefits quickly learn about and change their benefits selection as needs change.  Employees need not contact HR for benefit forms thus saving time and the employer expense of maintaining a benefits staff. 43  Other Benefits and Services (Overview) Awards Food Services Recreational and On-Site Health Social Services Credit Unions Legal Services Purchasing Financial Assistance Planning Transportation Housing and Pooling Moving 44 END OF SLIDES 45