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COMPENSATION
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MANAGEMENT (BMCM5103)
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ASSIGNMENT BMCM5103
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INSTRUCTOR : DR. ILHAAMIE ABDUL GHANI
AZMI

STUDENT NAME : SITI AISHAH BINTI ADNAN

Contents
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Abstract
The practice of good human resource management and job satisfaction staff can help to motivate
them and provide resources people in the success of all activities undertaken to achieve
organizational goals. This study aims to determine the level of human resource management
practices that specializes in management compensation and wage payment system from the
perspective of public and private sector workers were 30 questionnaires were given. The findings
showed that the practice of human resource management at the level of 'Satisfactory'. Five
recommendations were presented to the administrator of the companies in Malaysia to improve
existing practices to a higher level.

INTRODUCTION
If you pick the right people and give them the opportunity to spread their wings - and put
compensation and rewards as a carrier behind it - you almost dont have to manage them.
- Jack Welch
Human resource management is the integration and coordination of resources human to
effectively move toward the desirable goal within an organization (Zaidatol & Foo Say Fooi,
2007). Most of us would have heard the term compensation in the context of getting paid for
the work that we do. The work can be as part of full time engagement or part time in nature.
What is common to them is that the reward that we get for expending our energy not to
mention the time is that we are compensated for it.
According to Patten (1991), are all forms of compensation, payment or gratuities given to
all categories and levels of employees in an organization. Rewards are paid to workers in the
organization of work as business firms, government agencies, hospitals, schools, military
organizations and others. Milkovich & Newman (2005) say, compensation is defined as all forms
of financial returns and tangible benefits and services or clearly received by the employee as an

integral part of the employment relationship. The objective of the compensation system is to
reward employees in a fair and commensurate with their efforts and as traction to maintain an
efficient and effective work.
Compensation consists of two forms of financial compensation and benefit the
organization. Financial compensation such as pensions, insurance , Education, travel and various
ancillary facilities including dental care and maternity leave. Compensation in the form of
benefits that the organization is divided into two monetary items such as safety insurance and
paid holidays. While the non-monetary benefits are to improve the quality of life for employees
such as maternity leave, leave further education, children's services center and counseling
services.
The Research Methodology
This study was conducted on 30 respondents consisting of 15 males and 15 females.
Respondents were workers in the public and private sectors. questionnaires were distributed to
them. they have to answer the question then give their suggestions to improve the company's
compensation management in Malaysia.
Objectives Of The Study
Objective of this study was to examine the effectiveness of compensation management system in
the organization to motivate employees, sustaining them to continue to serve effectively in the
organization.

STUDY REPORT
Based on studies that have been made, a total of 15 respondents involved male equivalent
of 50% and another 15 respondens consists of women who are also equivalent to 50% of the total
respondents. they consist of public sector workers and private sector, among the factors that
leads me to target the public and private sectors as a subject of study, was to compare the
compensation and performance management reward system between the public and private
sector.
As noted, the public sector is the service-oriented sector, while the private sector was more to the
profit organizations and companies. thus, through this study, we can see the perspective of both
staff sector wage system implemented where they are working.

A. Demographic Findings

Chart 1; Section A

Background pie chart shows the percentage of respondents where 60 per cent of female
respondents than male respondents is 40 percent. This is because the respondents among men
harder than women interviewed.

Chart 2; Section A

Pie chart shows the percentage of respondents employment sector, where private sector workers
than public sector employees ie 57% (17 person) and 43% (13 person). this is because public
sector workers hard to find as busy with various activities, such as attending courses and
briefings.

Age
20-25 years old
26-30 years old
31 years and above
Total

Number Of Respondents
12
9
9
30 people
Table 1;Section A

Percentage (%)
40%
30%
30%
100%

In the above table shows the percentage of respondents age, starting with 20-25 years of age, up
to age 31 years and above, this is because at the age of 20 years and above, the majority of
respondents have had experience in the field of employment, thus have great insight and maturity
in answering questionnaires.

Graph 1; Section A
While, in terms of education level respondents, the bar graph above shows the number of
men who have spm and stpm is high compared with females, and female respondents showed the
highest number of certificate and diploma level, this is consistent with a global phenomenon in
the arena of education.
After knowing the background of respondents, the survey continues with questions related to
management compensation and reward system in the company they serve. findings of the study
will be displayed in bar graph form, followed by a detailed explanation.

B. Compensation Outcomes

In conducting research on this part, I have made a questionnaire in the form of support
among respondents agree or disagree about the statement given.

1. companies need to implement salary adjustments each year

Bar graph above shows none of the respondents strongly disagreed about the necessity of
coordinating workers' wages for each year, ie at the level of 0, while for those who do not agree
on very little amount of 1 for male and 2 for female respondents. among the reasons that may be
why they do not agree, is concerned about the company on the ground, and they claim they are
working not for profit alone.
While there are two people that are neutral respondents, and 13 people who agreed to the
statement given, as well as 12 people from the respondents strongly agreed with the salary
adjustment for each year.
The positive impact of salary earned by these very obvious with the increase in socioeconomic status of the people, especially the middle part. This increase is a positive to all
employees. The increase was a welcome relief to middle-income groups, such as the police, the
army rank and so that certainly need to be raised their socio-economic status since time
immemorial. With this, it gives an increased ability buy for those who are involved with the
salary increase.

Increase in fees received will increase household income. Indirectly family members will
also benefit as their children and wives for those who are married. in addition, increases in
income will cause their workers less debt, this is because they have sufficient income, but they
have to owe for reasons which cannot be avoided, such as housing and car loan debt from the
bank.

2. Consistent Annual Bonus Can Increase Your Motivation To Work

Referring to the bar graph above, Respondent will provide feedback on the annual bonus
is consistently able to increase their motivation to continue working. 3 of the respondents
strongly disagreed with the statement that the annual bonus each year they can increase their
motivation. for their annual bonus is not relevant to their work motivation. as well as those who
do not agree consisting of 4 people, then a neutral of 3 people. While as many as 10 people who
agreed and 11 respondents who strongly agree.

According Pinder (1998); Work motivation is a set of energetic forces that originate both
within as well as beyond an individuals being, to initiate work-related behavior and to determine
its work related behavior, and to determine its form, direction, intensity, and duration.
Thus, many of the respondents agreed that the continued payment of an annual bonus
each year can increase their motivation to work in the organization. This is because each
employee will always be hopeful and happy to work when thinking they will gain reward end of
each year, in addition to a monthly salary.

3. do you agree to grant commissions to any additional work that you do for the company

Bar graph above shows no respondents strongly disagree and disagree related
commission fee to be paid by the company for further work are given. responses, 4 were neutral
in this respect, while the rest agree and strongly agree with the commission by the company to
employees.
This is because the majority of them think the employee is entitled to wages or commission on
each additional work they do for the company. This will make them feel appreciated and
valuable to the company. next they will be more motivated to work and do not feel ignored by
employers. therefore, the employer should discuss the problem of reasonable remuneration to
workers through productivity for the benefit of the companies and their employees

4. Do You Agree That All Companies Need To Establish A System Of Revenue


Sharing?

Based on the fact that this fourth, almost all respondents agree and strongly agree with a profitsharing scheme between the company and employees. through this approach, all employees will
work diligently certainly further enhance the productivity of the company. With this partnership,
the employee will also feel responsible in increasing the company's revenue, because each such
acquired companies also benefit them.

5. Do You Agree That The Company Should Create A Pay System Based On Cost Of
Living Adjustments Employee?

All respondents agreed and strongly agreed with the awarding of salary based on the cost of
living. This is a very important requirement for all employees regardless of employment sector,
especially the lower income group.
Government of Malaysia has introduced a minimum wage system, the setting of
minimum wage workers based on the current cost of living. Rising cost of living, particularly the
price of daily necessities rising, pressures and difficulties also give the low income group,
especially those living in urban areas.

B. HUMAN RESOURCES OUTCOMES


1. Most employees are interested only in their own pay, without regard to others

Based on the graph above, a total of five persons of the respondents strongly disagreed
and 4 people who disagree with the statement that employees are only interested in their salaries
without taking cognizance salaries of other employees. for their knowledge of the salary of other

employees are able to provide them the information they receive payment differences. This is
important to assess the extent to which justice employer against an employee.
A total of five respondents are neutral, while nine of whom seven respondents agreed and
strongly agreed. This is because there are some of those who were satisfied with pay, because
their wages insufficient to meet the needs of even their expectations. Hence they do not want to
be taking cognizance salaries of other employees.

2. Employee satisfaction depends entirely on the amount of pay received

There are 5 people of respondents do not agree that employee satisfaction depends on the fees
they receive. The ground is not enough finance to make employees feel satisfied, but the
employer must give encouragement in the form of mental and emotional support, such as giving
awards and recognition to employees.
While the majority of them agree and strongly agree with the statement of an employee will be
satisfied with the payments they receive. Because the cost of living increased need adequate
financial resources to enjoy a comfortable life.

3. It is more valuable to the company to reward employees need for cash compensation than their
need for achievement.

Graph shows, there are two people that respondents strongly disagreed and 7 people who do not
agree, some of the factors they do not agree is because of their recognition of achievements
employers are also an important element for employee satisfaction, no doubt the finance charge
is also very important, but it needs to be aligned along the achievement of recognition by
employers.
Graph also shows the number of 11 people agree and 10 strongly agreed with cash compensation
from the employer to the employee. as noted, compensation in the form of cash is highly desired
by many employees of the employer, because a large part of their life's problems can be solved
with money.

4. To satisfy this motivation among employees, make merit increases and incentive awards will
match the level of job performance.

3 of respondents disagreed with the statement above, neutral 2, and the next 12 people agree and 13
strongly agreed. based on this statement, many people strongly agree that to motivate employees, the
employer must make a merit increase employee and also provide incentive payments to employees to
improve their work performance.

5. The desire to be seen as responsible or persons in charge in organizations will effect


motivation and job performance

Graphs show that many respondents who agreed that the sense of responsibility within the
organization able to increase employee motivation and performance.

RECOMMENDATION

Compensation is all remuneration received by employees on the work of the employee in


the organization. Compensation can be either physical or non-physical, and must be calculated
and provided to employees in accordance with the sacrifice that has been given to the
organization and the company where he worked.
Company to provide compensation to workers first perform the calculation performance
by creating a fair performance appraisal system. Such systems generally contain each employee
assessment criteria which have, for example ranging from the number of jobs that can be
completed, the pace of work, communication with other workers, behavior, knowledge of the
job, and so forth.
The employee may calculate performance and sacrifice themselves with compensation. If
employees are not satisfied with the compensation they get, then he can try to find another job
that better compensate. It is quite dangerous for the company when competitors hire / hijack
employees who were not satisfied because it can leak confidential company / organization.
Good compensation will give some positive effects on the organization / company as follows
below:
a. Getting good quality employees
b. Spur workers to work harder and achieve brilliant achievement
c. Lure qualified applicants than vacancies
d. Easy administration and implementation of the legal aspects
e. Has an advantage over a competitor / competitors

The concept of employee compensation and benefits cannot be discussed in a vacuum. Various
studies have established that salaries and benefits are closely related to job satisfaction (St. Lifer,

1994); and job satisfaction can bring about motivation which in turn affects employee job
performance and organizational commitment.
In order to improve companies nature of wage systems, more to cash compensation, they may be
able to use:
1. Basic rate system. Basic rate systems are straightforward but may not provide incentives to
individual workers. Under basic rate systems a worker is paid in relation to a given period of
time - an hourly rate, weekly wage or annual salary. Generally this rate is the established rate for
all workers in one category, but there are often incremental scales which allow for progression,
perhaps as additional experience and skills are obtained. Basic rate pay systems relatively simple
and cheap to administer and allow labour costs to be forecast with accuracy, they lead to stability
in pay and are easily understood by the workforce and who will be able to more readily predict
and check their pay. However, basic rate systems do not by definition provide direct incentives to
improve productivity or performance. Nevertheless employers may prefer to operate simple basic
rate systems and improve the design of jobs, so that the job provides the necessary interest,
motivation and satisfaction and basic systems may be criticised by individual workers, who wish
to see their own abilities specifically rewarded.

2. Incentive schemes for individuals. individual payment schemes include payment by results,
piecework and bonuses, work measurement (including measured day work) and appraisal and
performance related pay or other individual types of scheme include market-based pay, which
links pay to what is available outside the organisation, and competency/skills based pay, which
offers the opportunity for higher reward based on the acquisition and utilisation of additional
skills and competencies. On an individual basis this may be via payment by results (PBR)

example, bonus, piecework, commission, work-measured schemes and pre-determined motion


time systems, measured day work (MDW) or appraisal/performance related pay. Many sectors of
employment use pay systems that contain direct links to individual performance and results,
sources by, Acas Advisory Booklet: Appraisal Related Pay for more detail on these schemes,
2005.

3. Trends in pay structures. Pay structures are often used in conjunction with pay systems to
develop flexibility and an increased knowledge in the workforce of the organisation's business
needs. Many organisations are moving away from traditional management/worker demarcations
and are 'harmonising' their pay systems (and often other terms and conditions), or negotiating
'single status agreements' with the workforce. These can help with any issues of equality.
Organisations are increasingly looking at ways to improve business performance and need to
develop pay structures and systems which promote the acquisition of skills, increased flexibility,
greater awareness of business requirements and provide a strong link between individual/team
pay and the overall well-being of the organisation. Consequently, there has been a shift in
emphasis from valuing the job towards valuing the individual. This has led to the development of
pay structures which are less hierarchical and have pay systems attached to them which reward
individuals according to their contribution towards individual or corporate goals, sources from,
Reward Management: A handbook of remuneration strategy and practice by M Armstrong and H
Murlis for a detailed description of broad-banding.
Regardless of the effects of legislation on salaries in general, compensation continue to be
influenced by several factors that are producing some important trends in compensating workers.
One of such trends is aligning wages to the organizations goals. Others include tailoring

compensation to the needs of employees; better salary, and pay equity (Fisk 2001). Various
existing theories to support this argument have been identified and one of such is the
Reinforcement theory which is propounded by B.F. Skinner. This theory holds that individuals
can actually be motivated by their work environment when it is properly developed. Hence,
rather than considering internal factors such as attitudes, feelings, impressions and other
cognitive behaviour, employers should keep on making positive changes in the external
environment of the organization. It emphasizes the importance of a person's actual experience of
a reward, and the implication of this for compensation management is that high employee
performance followed by a monetary reward will make future high performance more likely.

REFERENCES
Seiler, E. 1984. Piece Rate vs. Time Rate: The Effect of Incentives on
Earnings. The
Review of Economics and Statistics, Vol. 66(3), 363-376.
Lazear, E. P. 2000. Performance Pay and Productivity. American Economic
Review, Vol.
90(5), 1346-1361.
Kementerian Sumber Manusia. 2008. PLWS. Jabatan Perhubungan
Perusahaan Malaysia,
KSM: Putrajaya.
Kementerian Sumber Manusia (2007): NER 2007. Jabatan Tenaga Kerja, KSM:
Putrajaya.
NPC. 2006. Productivity Linked Wage System. National Productivity Center:
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Lumpur.
Ainon binti mohd&Abdullah bin lassan, (2003) Panduan Menggunakan Teori Motivasi Di
Tempat Kerja,PTS Professional Publishing Sdn. Bhd.

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