Posted: May 15th, 2023

Employee Compensation, Performance Evaluation, Reward System, Employee Relations, and Movement

QUARTER 2 _ MODULE 4
Employee Compensation, Performance Evaluation, Reward System, Employee Relations, and Movement
What is It
Human Resources is considered the organization’s most important resource. Very few administrators would argue with the fact that human resources are very important for the efficient and effective operation of a company. Human resources are also called human capital, intellectual assets, or management or company talents to emphasize their importance. These terms implied that human resources are the drivers of the organization’s performance. Hence, employees’ welfare staffing must be considered a crucial function of managers.
Have you experienced working in a company or any works that you have received payment for? How much have you earned? Where did you use it for? Have you enjoyed your compensation? Every manager is a resource manager. Employees, undeniably, are the organization’s most important asset. Through the roles, employees play and the coordination of these roles done by the manager, organizational goals are achieved. As you have learned in the past lesson, staffing as the managerial function of finding the best and qualified to perform and fill in specific positions in the organization is important.
This chapter tackles finding, keeping, and bringing out the best in people through staffing practices and techniques. It discusses the recruitment and selection process and the different kinds of training programs given for employee development. It concludes with providing fair and consistent treatment to employees through proper performance appraisal, compensation, reward system, and employee relations.
Compensation or wages and performance evaluation are related to each other because the employee’s excellent or poor performance also determines a compensation given to them, after considering other internal and external factors like the actual worth of the job, compensation strategy of the organization, conditions of the labor market, cost of living, and area wage rates, among others. Compensation Compensation can come in different forms. It may be direct, indirect, or non-financial. It includes both the financial and the non-financial rewards that organizations give employees in exchange for their work. Compensation
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serves as a motivational factor for employees. Pay represents a reward that an employee receives for good performance that contributes to the company’s success.
Types of Compensation
Direct compensation includes workers’ salaries, incentives, bonuses, and commissions.
Indirect compensation includes benefits given by employers other than financial remuneration (example: travel, educational and health benefits, and others).
Non-financial compensation includes recognition programs, being assigned to do rewarding jobs, or enjoying management support, an ideal work environment, and convenient work hours.

Theories related to compensation:
Equity Theory, which is related to fairness, is a motivation theory focusing on employees’ response to the pay they received and the feeling that they received less or more than they deserve. Employees generally feel that their pay must be commensurate to the effort exerted in their job performance. In other words, pay equity is achieved when the pay given to them by their employers is equal to the value of the job performed. Thus, this motivates them to perform well and do their jobs to the best of their abilities.
Expectancy Theory is another theory of motivation that predicts that employees are motivated to work well because of the attractiveness of the rewards and benefits that they may receive from a job assignment. The employees’ perception of the compensation or be attached to a job position is an important factor in a certain name the motivational value of compensation.

The four basic kinds of compensation decisions:
Pay-level decisions are decisions about whether to pay workers at a level below, above or current market wages. Companies use job evaluation to set their pay structures. Job evaluation determines the worth of each job by determining the market value of the knowledge, skills, and requirements needed to perform it.
Pay variability decisions concern the extent to which employees’ pay
varies with individual and organizational performance.
Common pay-variability options.
Piecework is a compensation system in which employees are paid a set rate for each item they produce.
The commission is a compensation system in which employees earn a percentage of each sale they make.
Profit-sharing is a compensation system in which a company pays a percentage of its profits to employees in addition to their regular compensation.
Employee Stock Ownership Plan (ESOP) is a compensation system that awards employees shares of company stock in addition to their regular compensation.
Stock options are a compensation system that gives employees the right to purchase shares of stock at a set price, even if the value of the stock increases above the heat price.
Employee benefits are a method of rewarding employees that includes virtually any kind of compensation other than wages or salaries.
Pay structure decisions are concerned with internal pay distributions, meaning the extent to which the people in the company receive very different levels of pay. With a Hierarchical pay structure, there is a big difference from one pay level to another. By contrast, the Compressed pay structure, typically has fewer pay levels and smaller differences in pay between levels. Pay is less dispersed and more similar across jobs in the company.
Employment benefits include virtually any kind of compensation other than direct wages paid to employees.
Three employee benefits are mandated by law:
1. Social Security (SSS),
2. Workers’ compensation insurance (Philhealth), and
3. Unemployment insurance.
Two employee benefits options:
Cafeteria benefit plans (flexible benefit plans) plans that allow employees to choose which benefits they receive, up to a certain peso value, and
Pretax payroll deductions enable employees to pay for expenses such as medical care, daycare, and community out of pretax dollars.
Bases for Compensation: Employees may be compensated on the following bases:
Piecework basis – when pay is computed according to the number of
units produced.
Hourly basis – when pay is computed according to the number of work hours rendered.
Daily basis – when pay is computed according to the number of workdays rendered.
Weekly basis– when pay is computed according to the number of workweeks rendered.
Monthly basis – when pay is computed according to the number of birth months rendered.
Factors that influence Compensation Rates:
Internal factors are the organizations’ compensation policies, the importance of the job, the employees’ qualifications in meeting the job requirements, and the employer’s financial stability.
External factors include local and global market conditions, labor supply area original wage rates, cost of living, collective bargaining agreements, and national and international laws.
Performance Evaluation Performance Appraisal is the process of assessing the contribution of the employees, and the day achievement goes through the measurement and evaluation of these productive activities. The performance of employees under the supervision of the manager is his primary concern. The manager needs to assess whether he is performing well or there is room for improvement to conduct a fair performance appraisal, and a manager should communicate the responsibilities of the job when an employee is hired.
Purposes of Performance Evaluation: Administrative and Developmental Improving individual job performance through performance evaluation is just one reason why employees are continuously subjected to assessment. There are other purposes behind employee assessment that are beneficial to both the company and the employees.
Other purposes of Performance Evaluation:
Administrative purposes are fulfilled to appraisal or evaluation programs that provide information that may be used as a basis for compensation decisions, promotions, transfers, and terminations. Human resource planning may also make use of it for the recruitment and selection of potential employees.
Developmental purposes – are fulfilled through appraisal or evaluation
programs that provide information about the employees’ performance and their strengths and weaknesses that may be used as a basis for identifying their training and development needs. Through this approach, the workers become more receptive to the explanation given by the organization’s management regarding the importance of having evaluations at regular intervals, but these are conducted to improve their competencies to prepare them for future job assignments.
Performance Evaluation Methods The methods of evaluating workers have undergone development to adapt to new legal employment requirements and technical changes.
Some Evaluation Methods used today:
Trait Methods are performance evaluation methods designed to find out if the employee possesses important work characteristics such as conscientiousness, creativity, emotional stability, and others.
Graphic Rating Scale is a performance appraisal method where each characteristic to be evaluated is represented by a scale on which the evaluator or rater indicates the degree to which an employee processes that characteristic.
Forced-Choice Method is a performance evaluation that requires the rater to choose from two statements purposely designed to distinguish between positive or negative performance. It is a behavioral approach to performance appraisal that includes 5 to 10 vertical scales, one for each important strategy for doing the job and numbered according to its importance.
Observation Scale or BOS is a behavioral approach to performance appraisal that measures the frequency of observed behavior.

Employee relations Employee relations generally avoid and resolve issues concernin
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You have a good understanding of the relationship between compensation and performance evaluation. Compensation is a key component of employee relations, and it is important to ensure that employees are fairly compensated for their work. Performance evaluation can be used to assess employee performance and to identify areas where employees can improve. By linking compensation to performance, organizations can motivate employees to perform at their best.

Here are some additional things to keep in mind about the relationship between compensation and performance evaluation:

Compensation should be fair and equitable. Employees should be paid a fair wage for their work, and they should not be discriminated against on the basis of race, gender, age, or other factors.
Compensation should be linked to performance. Employees should be rewarded for their hard work and dedication. Performance-based compensation can help to motivate employees to perform at their best.
Compensation should be transparent. Employees should understand how their compensation is determined. They should be able to see how their performance is evaluated, and they should be able to understand how their compensation is linked to their performance.

By following these principles, organizations can create a fair and equitable compensation system that motivates employees to perform at their best.

Here are some additional tips for managing employee relations:

Be open and honest with employees. Employees should feel comfortable coming to you with their concerns.
Be fair and consistent in your dealings with employees.
Be willing to listen to employee feedback.
Be proactive in resolving employee issues.
Create a positive work environment. Employees should feel valued and appreciated.