Compensation and benefits is a term commonly used in human resource management. It may also sometimes be known as compensation, benefits and rewards. At first look, most people may relate it only to an employee’s salary. However, salary is merely a part of the compensation package.

So what are the other types of compensation in the Philippines? And what are some of the common benefits given to employees in the Philippines?

What is Compensation and Benefits?

Compensation and benefits (C&B) is a sub-discipline of human resources. This discipline focuses on employee compensation and benefits policy making to attract and retain good employees. In layman terms, it is about paying people fairly for what they are doing.

However, fairly in this context is subjective. Furthermore, it has to be within the budget and balanced for the employer to make a profit and the employee to feel appreciated. Therefore, it is also about communicating a mutual understanding of the value of the job and the employee. A good compensation and benefits strategy takes into account of these 4 different aspects: Sustainability, Value, Performance and Development.

As such, different organizations offer different types of compensation and benefits as part of the employee’s compensation package. The compensation package can be divided into 4 basic categories: Guaranteed Pay; Variable Pay; Benefits; and Equity-based Compensation. However, most of the time in the Philippines, only senior management receive equity-based compensation.

Types of Compensation in the Philippines

Compensation refers to the monetary payment that an employee receives as a result of an employer employee relationship. The employee may receive different types of compensation from the employer.

This may be due to a legal obligation, taxation complications and the organization’s consideration of the compensation and benefits strategy. For instance, the payment of overtime pay, holiday pay and night shift differential is regulated by law; while rice subsidy may be given because it is considered a de minimis benefit and may be exempted from taxation; and the design of a commission scheme is to encourage better performance from the employee. Therefore an employee’s compensation package in the Philippines may include one or more of the following components:

Different Types of Compensation in the Philippines

  • Basic Salary;
  • Cost of Living Allowance;
  • Rice Subsidy;
  • Clothing Allowance;
  • Transport Allowance;
  • Meal Allowance;
  • Holiday Pay;
  • Overtime Pay;
  • Night Shift Differential;
  • Commission;
  • Performance Incentive;
  • 13th month pay;
  • Year-end bonus such as 14th month pay;
  • Christmas bonus; and,
  • Conversion of unused leave credits.

In the Philippines, the employee’s daily minimum wage is regulated by law. The minimum wage in the different cities may be different and the rate is revised regularly to reflect the rise in the cost of living. So always check the latest minimum wage rate from the National Wages and Productivity Commission.

Employee Benefits in the Philippines

Employee benefit refers to other non-monetary forms of compensation or indirect payments to employees. These benefits are usually paid by the organization but they may also be co-paid with the employee. For instance, the organization may pay in full or share the medical insurance premium with the employee.

It is important to note that employee benefits are usually non-performance based. This means that employees receive the benefits regardless of their performance. Therefore, employee benefits as a whole have no direct impact on the employees’ performance.

However, the benefits that different employees receive in the same organization may differ due to differences in length of service, job responsibilities and job grade. Examples of employee benefits in the Philippines include:

List of Employee Benefits in the Philippines

  • SSS Benefits;
  • Philhealth Benefits;
  • HDMF Benefits;
  • Retirement Benefits;
  • Insurance Plans such as Life Insurance, Health Insurance, etc;
  • Leave Provisions such as Vacation Leave, Sick Leave, Bereavement Leave, etc;
  • Work Life Balance such as Flexible Work Arrangements, Shorter Working Hours, etc; and,
  • Organization sponsored activities such as Holiday Trips, Team Building activities, etc;
  • Other non-monetary benefits such as Gift Vouchers, Gifts, etc.

Organizations may also join programs that provide flexible employee benefits. It helps organizations to be able to provide a wide range of benefits to their employees without the cost of maintaining them individually. On the other hand, it also allows employees to choose the benefits with the highest perceived value to them.

When designing the compensation and benefits strategy, different organizations need to understand their own strengths in attracting and retaining employees. Not every organization can afford to pay in the 75 percentile or provide tons of benefits to their employees. Therefore, an organization needs to design a compensation strategy that suits them.