HRMGT 6: Compensation Administration "Policies, Principles, & Problems in Compensation Administraion" by Snell and Bohlander

1. HRMGT 6: COMPENSATION
ADMINISTRATION
7TH WEEK POLICIES, PRINCIPLES,
AND PROBLEMS IN
COMPENSATION
ADMINISTRATION.
Reference: Human Resources Management By: Snell & Bohlander
Reported by: Gil de Brando
Ivy Dayola

2. TOPICS TO BE TAKEN:
• General policies in salary administration.
• Principles considered in salary
administration.
• Problems in salary administration.

3. INTRODUCTION:
Compensation administration is the most sensitive
among all functions of the HR department. The pay and
benefits you, as an employee, receive are a
yardstick of how adequately the company is willing
to meet your needs.
Another name of compensation administration is salary
administration.

4. Different companies have different policies
regarding their salary administration.
• Normally all jobs in the organization are classified
into various pay classes; that is to say, a pay class
for each job.
• A minimum and a maximum salary for each class has
been fixed and established in accordance with the
Job Classification.
• All salary increases are in accordance with the
graduated steps in the pay class and within the salary
range for the pay class occupied by the employee.

5. Company’s reward philosophy
and reward system
• Intrinsic reward
• Extrinsic reward

6. Intrinsic reward
Which include:
• Employee empowerment and greater participation
in decision making
• More responsibility
• Interesting and challenging work and;
• Opportunities for personal growth

7. Extrinsic reward
Subdivided into:
1.Direct compensation
2.Indirect compensation
3.Non-financial compensation

8. Extrinsic reward
1. Direct compensation
• Basic salary
• Overtime and holiday
pay
• Performance bonus
• Profit sharing or stock
option
• Pension and retirement
pay
• And others
2. Indirect compensation
• Insurance and tenures
• Scholarship, tuition refunds,
bus services, gasoline
allowance, housing, rice
supply, uniform allowance,
counseling, recreational
membership and legal
services
• Fringe benefits

9. Extrinsic reward
3. Non-financial compensation
Is usually rewarded to officers, and it takes
the form of assigned parking, assigned
administrative assistant, and prestigious
titles.

10. GENERAL POLICIES IN
COMPENSATION
ADMINISTRATION

11. General policies in compensation administration
Are contingent to innovative ingenuity of
the HR executives and the availability of
funds of the company.

12. Salary Structure for 2002-2003/Guthrie-Jensen Consultants, Inc.
Level 1 – Jobs that are highly manual, which involve little skills and
more of physical exertion. Jobs classified are: Typing, filling and
other clerical works, messengerial, collecting, janitorial and driving.
Salary range Hiring rate: P8,000.00 and permanent rate: P9,500.00.
Succeeding increases:
a. 5 to 10% increase every year
b. 15 to 20% increase depending on performance
c. Adjustment depending on wage order

13. Salary Structure for 2002-2003/Guthrie-Jensen Consultants, Inc.
Level 2 – Jobs that involve skill but require a little planning and
organizing. Jobs classified are: Stock and inventory maintenance,
encoding, secretarial, purchasing.
Salary range Hiring rate: P9,500.00 and permanent rate: P10,000.00.
Succeeding increases:
a. 5 to 10% increase every year
b. 15 to 20% increase depending on performance
c. Adjustment depending on wage order

14. Salary Structure for 2002-2003/Guthrie-Jensen Consultants, Inc.
Level 3 – Jobs that involve talking to clients, coordinating,
collecting data, little decision-making and a great deal or report
writing. Job classified are: Telemarketing, research assistant,
executive secretary.
Salary range Hiring rate: P12,000.00 and permanent rate:
P14,000.00.
Succeeding increases:
a. 5 to 10% increase every year
b. 15 to 20% increase depending on performance
c. Adjustment depending on wage order
Level 4 – Supervisor level
Level 5 – Managerial level/Consultants
Level 6 – Executive level/Partners

15. Salary increases
Models of general policies in salary administration:
1. Merit increase
2. Promotional increase

16. Procedure in salary increases
1.Annual review
2.Special review

17. Job movement and salary administration
• Upward movement
(promotion)
• Lateral movement
(transfer)
• Outward movement
(change job, resignation, layoff, retirement, discharge)
• Downward movement
(demotion)

18. PRINCIPLES
CONSIDERED IN SALARY
ADMINISTRATION

19. Principles considered in salary administration
1. “Equal pay for equal work”
2. “A fair day’s pay for a fair day’s work”
3. “Incentive pay for extra effort”

20. PROBLEMS IN
SALARY
ADMINISTRATION

21. Problems in salary administration
• The difficulty in determining what is an adequate and fair
pay for a particular job.
• The utmost desire of the employees to earn more money
and simultaneously of management to operate and greater
profit.
• Employees are not satisfied with what they receive and
they continuously agitate for higher salaries and benefits in
order to improve their living standard.

22. Problems in salary administration
• Employers’ perennial concern to keep the operating costs as
low as possible so that they could offer their products or
services within the reach of consumers.
• Employers were right to keep the operating costs as low as
possible. Employees were right to demand for an increase in
wage due to the price hike of the basic commodities.
• The lack of sound pay policy.
• The absence of a written policy and clear guide in determining
the wage levels

23. SOUND COMPENSATION
POLICY IS IMPERATIVE

24. Sounds compensation policy is imperative
1. When the pay policy is clearly spelled out
2. When the policy is uniformly and consistently
implemented
3. When it is flexible enough to meet economic
contingencies.
4. When the wage policy has in-built safeguards
5. The policy has to be properly disseminated
and made known to all.

25. Thank You 
BSBA (HRDM) 3A
HRMGT 6: Compensation Administration