2023 Topic 5 Compensation & Benefits PDF

TOPIC 5: COMPENSATION & BENEFITS MGT340 HUMAN RESOURCE MANAGEMENT  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...

TOPIC 5: COMPENSATION & BENEFITS MGT340 HUMAN RESOURCE MANAGEMENT  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 given to employees that has 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 Financial Individual incentive programs give performance based pay to individual employees. Payment Example: Incentive for salesperson Incentive for managers & executives Bonus the extra payment or financial component which is received as a reward for doing one's job well  Other forms of compensation not including direct financial payment Indirect Financial Payment & Most of benefits offered by employer are in Non-Financial the form of indirect financial payments & non financial  WORKING HOUR SYSTEMS IN MALAYSIA Normal working hours Overtime Previously, workers in Malaysia had a maximum Working longer hour than normal working hours number of weekly working hours of 48 hours — Overtime rates: which roughly equates to around 8 hours per day, i. Ordinary working day = 1.5 times the normal 6 days a week. hourly rate However, from 1st January 2023, this maximum ii.Rest day = 2 times the normal hourly rate number has now been reduced to 45 hours per iii.Public holiday = 3 times normal hourly rate week (excluding meal time) Employee shall not be required under 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 one whole day.  WORKING HOUR SYSTEMS IN MALAYSIA Shift work Flexitime Part time Hours of works is outside System of working hours Part time working refers to normal working hours pattern where the starting and the number of hours-usually Two or more groups of stopping times are decided by calculated per week that an workers take turn to man the individual worker within a employee is required to work workstations number of limitation by the Part time worker either Example of shift work: employer. temporary or permanent i. Double day shift Flexitime terminology: working hours must be less i. Bandwidth than the normal hour. ii. Three shift work ii. Core hours Employment Act defines part iii.The split shift iii.Flexibands timer average hours should iv.Rotating and permanent not exceed 70% of normal shifts iv.Settlement period hours of a full time workers.  TYPES OF BENEFITS Certain benefits are statutorily required by (Employment Act, the Sabah and Sarawak Labour Ordinances, EPF Act, SOCSO Act and the Insurance System Act 2017 Types of benefits: Statutory benefits Non statutory benefits  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 confinement, Statutory maximum 90 days) During the maternity leave, maternity allowance is Benefits payable to employee providing she has NO more than 5 surviving children and she served the employer for at least 90 days before giving birth. Paternity leave Father in Malaysia is now entitle to 7 days paternity leave and limit to only five children irrespective of the number of spouses and must legally married.  Rest Day A weekly rest day Section 59 of Employment Act stipulates that all employees are entitled to one rest day per week. Public holidays Section 60 entitles all workers covered by Employment Act 1955 / SLOs to a minimum of : Statutory 11 paid gazetted public holidays per year (Peninsular Malaysia), Benefits 14 days (Sabah) 16 days (Sarawak). Five of the holidays are specified by the Act and must include: National Day The Yang di Petuan Agong’s Birthday The State Ruler’s Birthday Labour Day Malaysia Day  Annual leave The Employment Act provides that paid annual leave shall be given as follows: Less than 2 years: 8 days leave per year 2-5 years: 12 days leave per year More than 5 years: 16 days leave per year Statutory 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 sick leave per year.  Contribution to Employees Provident Fund (EPF) Statutory ❑Objective: To ensure that every worker has sufficient funds to sustain him once he has retired upon reaching the minimum benefits retirement age of 60. ❑Currently, employees are permitted to withdraw their savings from the fund at the age of 55, even though they are working. EXAMPLE: ❑Statutory contribution: Basic salary : RM1000 Employees (Below 60 years old)- 11% EPF : employee (11% - 2nd account) Employers – 12% : RM110 ❑Employees who are not required to become members of EPF: Domestic servants EPF : employer (12% - 1st account) : RM120 Foreign workers Government servants on a pension scheme SOCSO : employee (0.5%) of monthly wages ❑There are provision for the self-employed, partners in a business, sole proprietors, pensionable employees in public sector & foreign Total net salary: workers to contribute if they wish. They must pay a minimum or RM1000 – RM110 –RM5 = RM885 RM50 per month to the Fund. They also can choose to pay any amount above this up to RM5,000 per month as they wish.  Contribution to Employees Social Security Organization (SOCSO) To provide employees with compensation and financial benefits should they be involved in an accident at work, Statutory contract an occupational 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.  Non-statutory Benefits Insurance (other Time-off payments: Health Care: Financial services: than SOCSO): Marriage Becoming a Employers Loans to buy Personal valuable benefit to commonly buy life houses, cars and emergencies employees with and accident other items such Pilgrimage the rising cost of insurance group as computers may medical care. policies, which are be given to Studies Payment of usually combined employees, usually Death of a relative with medical with interest rates medical bills Hospitalization benefits, to lower than those benefits protect their charged by the employees banks Payment of optical bills Payment of dental bills  Non-statutory Benefits Retirement benefits Educational assistance Subsidies and Services Some employers are Companies may set up Canteens willing to pay a higher libraries of reading Transportation to and contribution to EPF on materials and computer- from work behalf of their readable files to Childcare facilities employees. encourage workers to Club membership and Large organizations may develop themselves. accommodation at establish special Companies may also can holiday resorts retirement funds as an pay fees if employees Quarters for the staffs extra to the EPF. wish to attend any training courses. Renting/provide hostels for young female or Scholarships may also be foreign workers offered to employees if they want to further their Air Asia and Malaysia studies. Airlines offer free flight tickets 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  FINANCIAL REWARDS Wage increments Salary of employees increase due to their good performance. This may motivate them to work harder. Bonuses It is a lump sum of money awarded for outstanding performance in any activity which the organization wants to encourage. REWARDS 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 the same organization.  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 Executive Letters of appreciation Praise in term of writing, oral in public or privately can be source of employee satisfaction. REWARDS 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 High achievers are sent to attend seminars, conferences and overseas tour  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.  WAGE SYSTEMS Piece-work/piece related system/payment by results Worker are paid according to the number of units produced in a given time. 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. 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.