Factors Considered in Deciding Compensation

Question 1

The wage rate is influenced by the demand for and supply of labor. Employers must offer competitive compensation to attract workers, and wage rates often reflect market demand for specific skills. Labor unions also play a role in collectively negotiating wages.

Answer 1

Demand and Supply of Labor

Question 2

Wages are often adjusted based on changes in the cost of living, which considers inflation, consumer price indices, and overall economic conditions. In the Philippines, this factor is especially significant in long-term contracts or during times of high inflation.

Answer 2

Cost of Living

Question 3

Organized labor can push for higher wages and better working conditions through collective bargaining. Unions may also exert pressure through strikes or other actions to compel employers to meet wage demands. In the Philippines, unions are active in industries such as manufacturing and transportation.

Answer 3

Labor Unions

Question 4

Government regulations, including the Minimum Wage Law, hours of work, and various labor codes, set the floor for wages and ensure fairness. Employers must comply with these laws to avoid penalties and ensure equitable pay across sectors.

Answer 4

Government

Question 5

Companies benchmark their wages against what is being paid in the industry or region to stay competitive. In the Philippines, multinational corporations typically offer higher pay compared to local companies, helping them attract top talent.

Answer 5

Prevailing Wages Rates

Question 6

What are the external factors that needs to be considered in deciding compensation?

Answer 6

1. Demand and Supply of Labor
2. Cost of Living
3. Labor Unions
4. Government
5. Prevailing Wage Rates

Question 7

A firm’s financial health and profitability influence its ability to offer competitive wages. Firms that struggle financially may lose employees to better-paying competitors, while successful firms may not need to exceed market rates to attract talent.

Answer 7

Ability to Pay

Question 8

The values and attitudes of top management shape wage policies. Some management teams focus on minimizing costs, while others may offer higher wages to attract skilled workers.

Answer 8

Top Management Philosophy

Question 9

Wages are often tied to worker productivity. Companies increasingly link wage increases to productivity gains, as high productivity allows for higher wages while keeping costs low.

Answer 9

Productivity of Workers

Question 10

The complexity and demands of a job, such as skills, responsibility, and working conditions, influence wage levels. Jobs with greater difficulty or responsibility generally offer higher compensation.

Answer 10

Job Requirements

Question 11

Factors such as performance, seniority, experience, and potential impact an employee’s wages. High performers or those with seniority are often rewarded with raises, while younger employees with potential may receive competitive pay despite limited experience.

Answer 11

Employee-Related Factors

Question 12

Compensation decisions can be influenced by internal politics, such as manipulating compensation surveys, job evaluations, or performance appraisals. Political considerations may distort a company’s compensation system.

Answer 12

Organizational Politics

Question 13

Modern compensation systems have evolved with changing organizational structures. Higher education standards and increased job complexity demand competitive pay. Compensation strategies are aligned with business goals and HR strategies to meet both employee needs and organizational objectives.

Answer 13

Evaluation of Compensation:

Question 14

What are the Internal Factors that needs to be considered when deciding compensation?

Answer 14

1. Ability to Pay
2. Top Management Philosophy
3. Productivity of Workers
4. Job Requirements
5. Employee - Related Factors
6. Organizational Politics
7. Evaluation of Compensation