HUMAN RESOURCE

MANAGEMENT
COMPENSATION
MANAGEMENT

EMPLOYEE REMUNERATION
Employee
remunerati
on

Pay

Incentives

Benefits

PAY
i) Salary
- Salary is the basic payment received
by an employee in an organization
after a period of time usually at the
end of each month.
- Salary paid to the employee as
income on work performed for a
specific period.
- Salary is the main cost incurred by
each organization.

ii) Wages
Wages are payments made to
employees based on the number of
hours worked or the quantity of items
completed.
- Wages typically paid on a daily or
weekly
basis.

Pay/Wage system

1) Time-Based Payment System

- Pay will be given for a specified
period of work either by the hour,
day, week or month.
- Different pay rates depending on the
number of hours worked and output
levels are not affected

Advantages of this system

Easily understood and administered
Fixed income workers more secure

Disadvantages of this system

This
system
does
not
emphasize
the
relationship between effort and remuneration
No additional incentives given to employees
who work efficiently or effectively means an
employee who strive hard in the course of his
employment will receive payment equal to the
employee that is not hard work.

2) Performance-Based Payment System

- Practiced by large companies who have the financial
means higher and more competitive.
- The system is intended to increase employee
motivation so that they can work more productively and
efficiently.
- Considered an effective remuneration system because
the system is trying to replace conventional systems
associated with the annual increase in salaries and
wages.
- This system allows the payment is done in a fair salary
according to their performance level.

3)
Outcome-based
payment
system
- Employees will be paid according to
the number of units of output that can
be produced in a given time period.
- This system involves the payment of
a certain sum for each unit of output
can be completed.

Outcome-based payment system based on

appropriate practice in the following situations

i. The work done has a short learning

cycle, the work can be learned easily.
ii. Employees have direct control on
the course work and effort they put,
the work is not regulated by the
machine.
iii. Not involve severe disruption to the
production process.

Advantages of this system

Employees can motivate themselves.
The workers will devote our best efforts to increase
the amount of salary to be received.
Disadvantages of this system
Not all employees will strive to increase their
income as influenced some social norms.
Quality of manufactured output might be affected.
Anxious to increase total output, the quality may be
sacrificed by employees
Employees may be more active against the
introduction of any such procedures, equipment or
improvements may result in loss of income,
especially if they are trying to adapt to the system

FEATURES OF A GOOD PAY SYSTEM

Wage payment system should be fair and justifiable to the workers and organization.
Wage payment system should be fair and justifiable to the workers and organization.

Wage payment system should be fair and justifiable to the

workers and organization.
Wage payment system should help in maximizing workers'
satisfaction and minimizing labor turnover.
Wage payment system should assure minimum guaranteed
wages to all workers.
Wage payment system should assure equal pay for equal work.
Wage payment system should provide more wages to efficient
and skilled workers.

 Wage
payment
system
should
follow
government policy and trade union's norms.
Wage payment system should be simple and
understandable to all the workers.
Wage payment system should help in
improving performance and productivity of the
workers.

Wage payment system should be flexible

enough to suit the needs of the organization.

INCENTIVE
(BONUS AND COMISSION)

- An additional incentive payments given to

employees based on employee performance,
loyalty to the organization, commitment and
years of service in the organization.
- Incentives designed to motivate employees to
continue to provision and performance of their
employees
to
continue
working
in
the
organization.
- Example is the annual bonus incentives,
funding
for
travel
abroad,
commission
salesperson and excellent service award

BENEFITS

Employee benefits are various non-wage compensations

provided to employees in addition to their normal wages or
salaries. In instances where an employee exchanges (cash)
wages for some other form of benefit is generally referred to as a
'salary packaging' or 'salary exchange' arrangement. In most
countries, most kinds of employee benefits are taxable to at least
some degree.

Examples of these benefits include: housing (employerprovided or employer-paid), group insurance (health, dental, life
etc.), disability income protection, retirement benefits, daycare,
tuition reimbursement, sick leave, vacation (paid and non-paid),
social security, profit sharing, funding of education, and other
specialized benefits.
The purpose of employee benefits is to increase the economic
security of staff members, and in doing so, improve worker
retention across the organization.

 Compensation
Payments granted to employees to enhance
their job performance
Benefit

Most important part of employee compensation

packages given due to their membership in the
organization
Reward

Important tool to attract and retain productive

workers in the organization and enhance
positive competition, whether between
individuals or between organizations working
with competitors

Similarities between the

Compensation, Benefits and Reward
The benefits provided to employees
based on the performance and
contribution to the organization.

The difference between the

compensation, benefits and
rewards
Compensation is given for the benefit
of improving the performance of
employees in organizations
Benefits are benefits provided by
membership in an employee
organization
Remuneration is given to employee
benefits based on work performed in
the organization of work

BENEFIT PROVIDE
TO EMPLOYEES

WHY PROVIDE BENEFITS

Benefits can:
Comply with employment legislation
Help attract staff to join the
organization
Help retain existing employees
Increase morale of employees, which
may lead to higher productivity

Statutory Benefits

1) Employee Provident Fund Act

)
First introduced in 1951 and
subsequently amended in 1991.
) To ensure that every worker has
sufficient funds to sustain him once he
has retired.
)
Private sector is to require
employees to retire at 55 or 56 years
of age because at the age of
55,employees
are
permitted
to
withdraw their savings from the Fund.


Was established as a form of
compulsory
savings
system
for
workers so that they and their families
would
not
impoverished
and
dependent on the state once they
retire from the workforce.

Every employer is required to

register with the Employee Provident
Fund (EPF) Board on setting up the
business.
Any employer who fails to register is
liable to imprisonment of up to three
years or a fine up to RM10,000 or both.

 Employees are liable to pay monthly

contributions to the Fund currently at
11 per cent of their wages.
They are required to deducted this
amount from their employees wages
and pay it on their behalf to the Fund,
along with the employers contribution
of 12 per cent of the workers monthly
wages

2) Employee Social Security Act 1969

To provide employees with compensation
and financial benefits should they be
involved in an accident at work, contract an
occupational disease or become an invalid
(from whatever cause)
The scheme is administered by the Social
Security Organization (SOCSO) which is
responsible to ensure employers register
with the organization and pay contributions
as required by the Act
SOCSO also pays out benefits to eligible
claimants.

The main benefits that the organization

provides are :
Medical benefits for those who suffer from
employment injury
Disablement benefits for the family of an
employment injury
Dependents benefits for the family of an
employee who dies of an employment injury
Invalidity pension
Constant attendance allowance
Survivors pension
Funeral benefits
Supply of prosthetic appliances
Facilities for rehabilitation.

 The advantages of the employer to

ensure he registers his eligible
employees under the Social Security
scheme because once a worker is
insured with SOCSO he loses the
right to sue the employer for
damages for any work related injury
or disease that he may contract.

3) Gazetted payment (Maternity

leave)

A female employee entitled to

maternity leave of not less than 60
consecutive days and eligible for
maternity
allowance
from
the
employer during the period
A pregnant female employee can
not apply for maternity leave earlier
than 30 days before birth or after birth.
Failure to comply will result in the
employee not eligible to receive any

To qualify for a pregnant female

employee for an allowance, she must
comply with the
Must give birth by birth definition
provided under this act
Has been serving by the existing
employer for four months before
delivery
Work with the existing employer not
less than 90 days in the nine months
before birth
Have no more than five or more

4) Gazetted paid leave (Time off

payment)
Apart from maternity leave, other
types of paid leave are provided for in
the Employment Act and the Sabah
and Sarawak Labour Ordinances.
These are as follows :
A weekly rest day
Public holidays
Annual leave
Sick leave

A weekly rest day

Section 59 of Employment Act
stipulates that all employees are
entitled to one rest day per week.
An employee may not be required to
work on his rest day,except in
circumtances stated in the law.
When an employee works on a rest
day,he will enritled to premium rates
of pay.

Public holidays
Section 60 entitles all workers covered
by the Emploment Act to a minimum of 10
paid gazetted public holidays per year.
Four holidays are specified by the Act
and must include :
National Day
The Yang di Pertuan Agongs Birthday
The State Rulers Birthday
Labour Day

 Other six holidays will be chosen by the

employer.
The Sabah Labour Ordinance,employees must
be provided with 14 public holdays per year.

The Sarawak Labour Ordinance makes it

compulsory for employers to grant workers 16
public holidays per year.
To prevent absenteeism at holiday time,the
Act provide that if a worker is absent without the
employers consent on the day immediately
before and after a public holiday,he is not
entitled to holiday pay.
If an employee is required by his employer to
work on a holiday,he is entitled to two days
extra wages.

Annual leave
Number of annual leave requested by an employee who is
entitled to rely on the service. The longer the of years of
service, the more annual leave that can be enjoyed.
The Employment Act provides that paid annual leaves shall
be given as follows :
For service of less than two years
For two to five years service
For more than five years service

- 8 days leave per year

- 12 days leave per year
- 16 days leave per year

 Some organizations require employees to take all

their annual leave each year and where any employee
who fails to do so will lose the holidays.
Some employers allow employees take their annual
leave to the following year or to pay them a sum of
money equal to the wages of a day based on the number
of days of annual leave not taken.

Sick leave
Sick leave will only legally be given
to employees who are unable to work
due to illness

Many employers require an

employee to get confirmation from a
doctor that she was sick before
entitled to this benefit

Number of days of sick leave an employee is

entitled to enjoy usually depends on the length
of service of employees.

For service of less than two years

- 14
days leave per year
For two to five years service
18 days leave per year
For more than five years service ` - 22
days leave per year
60 days leave per year for employee who
need hospitalized

5)HUMAN RESOURCE DEVELOPMENT FUND

) HRDF is an organization that stimulates the deployment of
modern and innovative management training and
consulting in the country by collaborating with companies
that use the services, suppliers of the services and
governmental authorities and international bodies.
) HRDF creates awareness for the use of management
training and consulting services without carrying out such
activities itself and stimulate practical training which
results can be used directly in the companies.
) It works directly with enterprises and addresses their
specific needs for learning and training activities, rather
than offering a standardized package.
) HRDF is an institution which involve all interested and
involved parties in development of management in the
country.

 Non- statutory benefits

1) Time- off payment
Apart from the sick leave, maternity leave and annual
leave guaranteed under the Employment Act, many
companies offer other types of leave, especially to
unionized workers and management.
These include leave for the purpose:
a) Marriage
b ) Birth of child ( paternity leave )
c ) Personal Emergencies
d) Studies
e ) Death of relatives

2) Health care
Financing of health care benefits provided
by the organization refers to facilities for
the treatment bills and employee health
care expenses and those of their
dependents.
Usually, the organization will appoint a
panel clinic can be visited to employees
and their dependents to get free
treatment.

3) Insurance
Protect the employer shall provide employees with life
insurance or accident insurance for their group.
By reason of the offer forms of insurance is group
insurance, the premium amount to be paid is less than the
amount of premiums charged under individual insurance
plans.
Normally, employees who are covered under a insurance
group, do not have to undergo medical check up before the
insured.

4) Financial Services
Loans to buy houses, cars, and other items such as
computer can be given by the organization to the
employee with an interest rate lower than the interest rate
charged by banks.
Employees can also get a bank loan with a subsidies from
the employer.

5) Subsidies and services

Kind of subsidy is usually given by an organization to
its employees is canteen subsidy, laundry, childcare
and provide transportation to and from work.
Not all organizations providing similar subsidies and
services.

6) Allowances
Salary or wages may be increased through the
following allowances:
a ) Travel / transport allowance
b ) Meal allowance
c ) Housing allowance
d ) Standby allowance
e ) Entertainment allowance

7) Educational fees assistance

To encourage employees to further develop or advance
themselves, the organization may build a library of reading
materials and videos that can be borrowed by employees
to increase their job knowledge.
Organization will pay all course fees for employees who
wish to attend courses to enhance the knowledge and
improve the potential employee.
Scholarships will also be offered to potential employees
who want to further their studies.
8) Retirement benefits
Retirement benefit contributions refer to facilities provided
by the employer to the employee under the EPF scheme.
Employers, who do not make contributions to an
employee, may be prosecuted in court. This contribution
can ease the burden of the workers when they are retired
and do not work anymore

REWARD

DEFINITIONREWARD

Rewards is all forms of opinion received by the

employee in return for work done.
Reward is something to be desired and
appreciated by employees and given in the form
of money, services or other benefits appropriate.
Rewards will generally only be given to an
employee or a small group of employees who are
considered by the employer is entitled to receive
it.
Rewards are usually associated with an
employee's work performance.

Non-financial Rewards

1) Performance Award
- Awards for Worker of the Month,
'Best Executive and other may be
given to employees who have high
job performance shows.
- These awards may be given in the
form of cash, certificate or valuable
of gifts as gold.

Letter
Of
Appreciation
Or
Commendation
- Praise be given either in writing or orally
in public or privately to increase
satisfaction or employee motivation.
- Praise given way must be able to reflect
the level of performance praised.
- Employee who has shown a very good
performance can be given a letter of
appreciation signed by the head of
department or a higher ranking manager.
2)

3) Sponsorship to seminars, conferences

and overseas tours.
- Employers can show their gratitude to the
high-performing employees to finance their
expenses
to
attend
seminars
and
conferences or participate in overseas travel
package to visit a parent company, supplier
or customer.
- In addition to the personal benefit of the
trip, the employees are expected to bring
back new ideas or add contacts to
organizations that may be useful to the
organization in the future.

4) Rewards for long service

- Traditionally, employers value loyalty and recognized long
service with some token of appreciation, which may or
may not have economic value.
- A gold watch, a trip overseas, a special dinner event or
combinations of these items were common.
- Today, however, increasing numbers of employers are
hiring people on flexible short-term contracts and workers
themselves no longer have an expectation of a long stay
with any particular employer, so this type of reward is less
common outside public sector employment.
- There is also little available evidence to show that such
rewards actually encourage loyalty.
- workers leave their employment for many reasons and
are not likely to be influenced to stay simply because they
are due for a long-service award.

 Financial Rewards
1) Salary Increase
- Manager will provide salary increases to
employees who show good performance
at any appropriate time, for example once
a year based on salary increase policy
organization.
- Usually the percentage pay increase given
depending on the level of employee
performance.

2) Bonus

- Bonus is the amount of money awarded to an

employee
who
has
showed
excellent
performance
in
participation
activities
undertaken by the organization.
- Bonus can be in groups or individually. Some
organizations will pay a contractual bonus of a
month or several months salary to all employees
at the end of the year.
- The ability of most organizations to give bonuses
to employees depending on the level of profits
for the year.

3) Profit Sharing
- Under the profit-sharing scheme a certain
percentage of the total profit organization
will be used to pay bonuses to employees
either annually or on deferred plan
organization.
- If deferred payment is made, the employee
will only receive the bonus funds when he
retires.
- Therefore, the scheme is an effective way to
cultivate
loyalty
to
organization
as
employees will lose bonus funds if they
leave the organization before retiring.

4) Reward Salespeople (Commissions)

- Traditionally, salesperson have reward

systems which are different to that provided
for other employees in the same organization.
-It is assumed that salespeople, more than any
other group
of workers, are strongly
motivated by money.
-Therefore, their reward systems are usually
based on a commission system.

 Ideas for motivating a sales team by sale experts

(Tom Reilly& Dirk Beveridge)
- Employers understands that every person is
different and may need to be motivated in a
different way.
- Money is not the only motivator. People need to be
paid well, but other factors also influence
salespeople.
- Regular performance reviews need to be held so
that people know where they stand in relation to the
other salespersons.

WAGES
DETERMINANT

LEGAL FRAMEWORK
This wage determination in accordance
with national law. Other countries wages.
Malaysia law has established civil
servants' salary grades.
The Payment of Wage Act 1936
The Payment of Bonus Act 1965
The Equal Remuneration Act 1976

MARKET SURVEY

A market survey is an important

requirement for initiating any successful
business. The objective of a market survey
is to collect information on various aspects
of the business. This survey is a tool
through which we can minimize risk. After
the market survey, the results must be
analyzed in order to finalize a business
plan.
Determine where an organization seeks to
be in the pay market- above market
average or below market.

WORKING VALUE
Job evaluation is a method of using
formal procedures and work regularly
to compare and determine the
relative value of one job to another.
Become the basis for a fair wage
system

JOB EVALUATION METHOD

COMPENSATION STRATEGIC

involves compensation practices being aligned

with the achievement of the organisation's
strategic business objectives.
Formidable communicator and can be a powerful
instrument for change and a major determinant
of the culture of an organization.
They also symbolise that continued employment
is contingent upon performance.
It should be noted that reward systems by
themselves will not change a culture, but they
can help reinforce a desired culture.

EQUITY

DEFINITION EQUITY
Concept that people derive job
satisfaction
and
motivation
by
comparing their efforts (inputs) and
income (outputs) with those of the
other people in the same or other
firms.

INTERNAL EQUITY
Fairness of pay differentials between
different jobs in organization
Established by job ranking, job
classification, point systems or
factor comparisons

EXTERNAL EQUITY

Fairness
of
organizational
compensation levels relative to
external compensation
Assessed by collecting wage & salary
information to guide in setting
organizations pay strategy to lead,
meet or lag labor market wages

INDIVIDUAL EQUITY
Fairness about pay differentials among individuals in
same job
Established by using
Seniority-based pay systems: Reward longevity
Merit-based pay systems: Reward employee
performance
Incentive plans: Employees receive part of
compensation based on performance
Skills-based pay systems: Compensation based on
employees possessing skills that firm values
Team-based pay plans: Encourage cooperation &
flexibility

 Basing pay on seniority

Merit pay systems
Incentive pay
Returns financial rewards to employees responsible
for creating them
Allows organizations to adjust compensation
expenses based on organization performance
Variety of forms
Tied to employees, work units, or organizations
results

Skill-based pay systems

Base compensation on acquisition & mastery of skills
Give employees incentives to learn
Promote flexibility
Easily linked with training programs & strategic

 Team-based pay plans

Can
be
less
time-consuming
than
administering individual reward systems
May impact group dynamics
Can adversely impact & intensify conflict
Need decentralized decision-making system
Need high level of communication with
employees
Employees should have voice & provide input
into design
Team members need to feel system is fair &
equitable

THANK YOU