• A set of general guidelines established by the top

management of a company in paying and

rewarding employees for the work they
rendered.
• An effective compensation policy motivates
employees to perform well in their job. It also
increases employee loyalty and they tend to stay
longer. Lastly, it helps to attract applicants.
Module 12: Compensation & Rewards
1. Economic – budgetary limitations.
2. Fairness – justly compensated.
A. Equity theory of motivation
a) Internal Equity
b) External equity
c) Individual equity
3. Market competitiveness – prevailing market
rates.
4. Link with company performance
Module 12: Compensation & Rewards
• Base pay • Legally acquired benefits
– Salary: fixed monthly basis – government-mandated benefits.
– Wages: hourly or daily – SSS, GSIS
basis – PhilHealth
• Incentives (performance) – PAG-IBIG
– Bonus • Optional Benefit
– Commissions
– Medical insurance
– Profit sharing
– Life insurance
arrangements
– Stock options
– Retirement plans
– Merit increase – Car plans, etc.
Module 12: Compensation & Rewards
 REWARDS
• Extrinsic Rewards – monetary or material
rewards.
• Intrinsic Rewards – nonmonetary rewards given
to employees who performed well.

Q: What are the implications of financial

incentives?
END.