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0 Introduction
Compensation is a systematic approach of providing monetary value to employees in
exchange for work performed. Compensation may achieve several purposes assisting in
recruitment, job performance and job satisfaction. It is a tool used by management for a variety
of purposes and may be adjusted according to the business needs, goals and available resources.
The objectives of compensation programs are as per below:
 Recruit and retain qualified employees.
 Increase or maintain morale/satisfaction.
 Reward and encourage peak performance.
 Achieve internal and external equity.
 Reduce turnover and encourage company loyalty.
 Modify (through negotiations) practices of unions.

Recruitment and retention of qualified employees is a common goal shared by many

employers. To some extent, the availability and cost of qualified applicants for open positions is
determined by market factors beyond the control of the employer. While an employer may set
compensation levels for new hires and advertize those salary ranges, it does so in the context of
other employers seeking to hire from the same applicant pool.

Morale and job satisfaction are affected by compensation. Often there is a balance
(equity) that must be reached between the monetary value the employer is willing to pay and the
sentiments of worth felt by the employee. In an attempt to save money, employers may opt to
freeze salaries or salary levels at the expense of satisfaction and morale. Conversely, an
employer wishing to reduce employee turnover may seek to increase salaries and salary levels.
Compensation may also be used as a reward for exceptional job performance. Examples of such
plans include bonuses, commissions, stock, profit sharing and gain sharing.

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The components of compensation include salary, benefits and incentives. These components are
affected by the fundamental elements below:

 Job Description - A critical component of both compensation and selection systems, job
descriptions define in writing the responsibilities, requirements, functions, duties,
location, environment, conditions, and other aspects of jobs. Descriptions may be
developed for jobs individually or for entire job families.
 Job Analysis - The process of analyzing jobs from which job descriptions are developed.
Job analysis techniques include the use of interviews, questionnaires and observation.
 Job Evaluation - A system for comparing jobs for the purpose of determining
appropriate compensation levels for individual jobs or job elements.
 Pay Structures – This is useful for standardizing compensation practices. Most pay
structures include several grades with each grade containing a minimum salary/wage and
either step increments or grade range. Step increments are common with union positions
where the pay for each job is pre-determined through collective bargaining.
 Salary Surveys – Surveys are essential for collection of salary and market data. This
includes average salaries, inflation indicators, cost of living indicators and salary budget
averages. For example, company A may purchase results of surveys conducted by survey
vendors or may conduct their own salary surveys. It is important for company A to know
which industry or geographic location the salary results concern to, before making a
comparison.

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2.0 Objective

The objective of our assignment is to study the compensation of non- executive personnel in
Tenaga Nasional Berhad.

3.0 Company Overview

Tenaga Nasional Berhad (TNB) is the largest electricity utility company in Malaysia with
estimated RM71.4 billion worth in assets. Powering the nation for over a decade and committed
to providing service excellence, the Company is listed on the main board of Bursa Malaysia and
employs approximately 28,000 staff to serve a customer base of over seven million in Peninsular
Malaysia & Sabah. Today, TNB continues to lead the effort in fostering economic growth and
social development in the country.
Meanwhile, employees’ competencies are continuously enhanced through structured
programmes to ensure topmost proficiency, earning TNB a remarkable reputation. TNB is
ranked 100 from a list of 250 power companies worldwide for the “Power Company of the Year”
in the 2008 Platts Global Energy Awards. In addition, TNB was also the proud winner for The
Prime Minister’s Industry Excellence Award for 2007. This annual national quality award is
given to organizations in the private sector in recognition for their excellent achievement in
quality management. Passionate at what TNB do through its subsidiaries, has been successful in
other diversified activities, which include manufacturing transformers, high-voltage switchgears
and cables as well as in the provision of professional consultancy services.
In TNB, they believe that educating and inspiring leaders is fundamental in achieving a
brighter future. Hence, University Tenaga Nasional (UNITEN) is aimed at producing
outstanding individuals in various fields. A major part of the Company’s corporate social
responsibility in education, sponsorships and contributions, is channeled through the trust
foundation namely Yayasan Tenaga Nasional.
The vision of TNB is “To be among the Leading Corporations in Energy and Related
Businesses Globally” and the mission is “We Are Committed to Excellence in Our Products and
Services”. Hence, to achieve the said vision and mission, TNB needs to continuously sustain
their performance and efficiency while keeping abreast with global competition.

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Importance of compensation in TNB

Talented, dedicated employees are the lifeblood of TNB. Employees who know they are valued
are more productive, have a higher level of job satisfaction, and are less likely to leave the
organization. Because TNB’s employees are quite literally their greatest investment and greatest
asset, it is critically important for TNB to establish an atmosphere in which employees know that
they are valued. This requires TNB to create a culture of mutual respect, reward, and recognition
for employees at all levels.

In the following sections of this report, we will be diving deeper into the 3 components of
compensation which are Salary, Incentives and Benefits.

4.0 Salary Grade

A pay structure helps answer questions about who's who, what each person's role is, and why
people are compensated differently. It also helps human resources personnel to fairly administer
any given pay philosophy. For example, a company might want to pay everyone at market; or
pay some people at market and some above it. Opportunities for incentives are also dealt with in
the pay structure. For example, people with strategic roles will likely have opportunities for
higher incentives.

Salary Range – Listed below are the salary grades for non executives employees according to
their respective roles. Employees shall be paid in accordance with the salary ranges set out in the
table as per 1, 2, 3, 4 and 5 below:
a) Salary scheme for Employees in Administration Services as per table 1;
Grade Minimum Salary (RM) Maximum Salary (RM)
PP03 750 1,400
PP04 800 1,600
PP05 850 1,750
PP06 900 2,100
PP07 1,150 2,700
PP08 1,150 3,100
PP09 1,400 3,300
PP10 1,600 3,600
PP11 1,750 3,800
PP12 2,000 4,400

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 Table 1

b)Salary scheme for Employees in Support Administration Services as per table 2;

Grade Minimum Salary (RM) Maximum Salary (RM)
PS03 800 1,550
PS04 850 1,900
PS05 900 2,050
PS06 950 2,200
PS07 1,050 2,400
PS08 1,100 2,600
PS09 1,400 3,200
PS10 1,600 3,400

Table 2

c) Salary scheme for Employees in Food and Accommodation Services is as per Table 3;
Grade Minimum Salary (RM) Maximum Salary (RM)
PM03 750 1,400
PM04 800 1,600
PM05 850 1,750
PM06 900 2,100
PM07 950 2,300
PM08 1,050 2,550
PM09 1,100 2,750
PM10 1,200 2,890
PM11 1,400 3,200
PM12 1,600 3,400

Table 3

d) Salary scheme for Employees in Kindergarten/Religious Teacher Services is as per table 4;

Grade Minimum Salary (RM) Maximum Salary (RM)
PG03 750 2,010
PG04 850 2,230
PG05 900 2,440
PG06 1,000 2,660
PG07 1,200 2,870
PG08 1,300 3,080

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 Table 4
e) Salary scheme for Employees in Information Technology Services as per Table 5;
Grade Minimum Salary (RM) Maximum Salary (RM)
IT05 1,250 2,750
IT06 1,400 3,200
IT07 1,500 3,350
IT08 1,600 3,700
IT09 1,700 3,900
IT10 2,000 4,500

Table 5

5.0 Incentives
Incentive pays a form of direct compensation where employers pay for performance
beyond normal expectations to motivate employees to perform at higher levels. In structured
incentives, workers understand ahead of time the precise relationship between performance and
the incentive reward. In a casual approach, workers never know when a reward will be given.
Three possible drawbacks to the casual incentive approach may include (1) jealousy among
employees, (2) feelings among workers that the supervisor may be acting out of favoritism, and
(3) the use of rewards to maintain social distance. Listed below are the incentive package
provided by TNB.

Promotion and Upgrading

Promotions and upgrading are the prerogative of the Company in the accordance with the
Company’s prevailing policies, rules and procedures. Employees may also be considered for
promotion to executive level. Advancement from a lower grade to a higher grade within the same
salary band is considered as an upgrading. The quantum of salary adjustment due to upgrading
is 10% of the Employee’s salary. If such a salary adjustment does not bring the Employee’s
Salary to the minimum of the appropriate higher salary grade, the Employee’s Salary shall be
adjusted to the minimum of the higher salary grade. Advancement from a lower salary band to a
higher salary band is considered as promotion. The quantum of salary adjustment due to
promotion is 15% of the Employee’s Salary. If such a salary adjustment does not bring the
Employee’s Salary to the minimum of the appropriate grade in the higher salary band, the
Employee’s Salary shall be adjusted to the minimum of the appropriate grade of the band,
however if such Salary adjustments exceed the maximum Salary of the higher grade, the

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Employee shall receive the 15% increase and his salary adjusted accordingly on Personal To
Holder (PTH) basis. An Employee who receives a salary adjustment on promotion or upgrading
shall not be deprived of his annual increment. Where the promotion or upgrading date coincides
with the annual increment date, annual increment shall be given before promotions or upgrading
increment.
Annual Increment
Annual increment shall be a variable award based on performance and prevailing market
rate and it shall be on 1 st January. A newly recruited employee shall receive his annual increment
on the anniversary of his recruitment. His subsequent annual increment shall be on the 1 st
January on a pro-rated basis. Employees who are currently on the maximum salary may be given
a monthly performances allowance at the discretion. This performance allowance is given for a
year. An Employee whose salary is below the maximum and whose annual increase based on
performance takes him beyond the maximum of the scale shall be eligible to receive the
maximum salary in his scale. In addition he shall be eligible to receive the monthly performance
allowance. An Employee who is promoted shall continue to be eligible for monthly performance
allowance for the rest of the year.
Bonus
The company may at its discretion pay an annual bonus to confirm employees based on
the company and individual performance. Only Employees who have completed a full financial
year service shall receive the full bonus for the year. Notwithstanding the statement above, the
following employees shall be paid bonus on a pro-rated basis, based on the period served during
the financial year:
a) Employee who retires upon attainment of compulsory retirement age;
b) Employee who opts to retire before, upon or after attainment of optimal
retirement age;
c) Employee who is retrenched;
d) Employee whose service is terminated for physical disablement or prolonged
illness;
e) Employee who dies in service (pro-rated bonus shall be paid to the Employers
next of kin).

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Special Fixed Allowance for Transportation
An employee whose basic salary is less than or equal to RM 1,000 shall be paid a Special
Fixed Allowance of RM 120 per month. An employee whose basic salary is more than RM1, 000
shall be paid a Special Fixed Allowance of RM 110 per month

6.0 Employee Benefits

Employee benefits refer to non-wage compensation provided to employees in addition to
wages or salary. This can include a wide range of benefits including social security benefits,
retirement, death benefits, medical care, sickness benefits, long-term care, child care, tuition
fees, housing allowances, company cars, profit-sharing, share-options, termination indemnities,
relocation assistance, and shopping discounts. Benefits may be financed by employer and/or
employee contributions. The benefits provided by each organization depend on local taxation,
social security and labor law. Listed below are the employee benefits provided by TNB.

Annual Leave

1. Annual leave eligibility for Employees who joined the company after 11 th March 1994 is
as follows:
Length of Service
5 Years and above
10 or more
Less than 5 years but less than 10
years
years
16 days 18 days 20 days

2. Annual leave shall not include rest day, off days, gazetted public holidays, sick leave or
any other paid leave. An Employee is allowed to accumulate his unused annual leave at
the end of each calendar year. However, he may accumulate his annual leave in the Leave
Bank for a maximum period of 100 days at any one time. Part or total leave available in
the Leave Bank may be taken by the employee for any purpose at any time during his
service with company. Any leave accumulated in the Leave Bank if not taken at the time
of retirement, termination/ resignation or in the event of death shall be converted into
cash at the discretion of the company.
Special Leave

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The company shall grant paid leave for the following occasions:-
For the death of a family member (including parents and parents-in-low, brothers sisters
of the employee) up to a maximum two working (2) days; For the birth of a legal child
subject to a maximum of three (3) working days; To attend to a disaster such as flood,
fire or landslide up to a maximum of two (2) working days at any one time. (However,
the number of days may be exceeded at the discretion of the company); for marriage of
an Employee (restricted to one marriage in his whole service in the company) up to a
maximum of three (3) working days.
Maternity Leave
A female Employee shall be entitled to maternity leave for a period of 60 consecutive
days. Maternity leave with full pay is only for a female Employee who at the time of
confinement has less than five (5) surviving children. Leave on account of miscarriage prior to
the 28th week of pregnancy shall not be considered as maternity leave but as sick leave.
Pilgrimage Leave
A Muslim Employee shall be entitled to paid pilgrimage leave to perform the Haj once in
his whole service. A maximum of 40 days leave may be granted for the purpose of the
pilgrimage. If the Employee requires leave in excess of 40 days, he may apply his annual,
accumulated annual leave or leave without pay.
Leave Prior to Retirement
An Employee prior to his retirement from the service of the company subject to
exigencies of service shall avail all annual leave for which he is eligible. Such leave shall be
treated as qualifying service and converted to cash.
Leave Without Pay
An Employee may be granted leave without pay for important personal reasons at the
discretion of the Company, provided the employee has exhausted his annual leave.
Funeral Expenses
Funeral expenses of RM2000 shall be paid by the Company to an Employee’s next-of-kin
in the event of the death of the Employee.
Housing Loan
A confirmed Employee with not less than three (3) years service is eligible to apply for a
loan under the Company’s housing loan scheme base on the prevailing terms and conditions at

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an interest rate of 4% per annum. The loan eligibility shall be 75 times Salary subject to a
maximum of RM 160,000.The maximum repayment period of the loan shall be 25 years or the
remaining period of his service until retirement age, whichever is earlier.

Vehicle Loan
A confirmed Employee in a supervisory position is eligible for a car loan up to RM
50,000. Other employee may also be considered for a car loan based on the need to carry-out
official duties or for other special reasons as determined by the company. The loan shall be based
on prevailing terms and conditions at 4% interest rate per annum. An Employee is eligible for a
car loan every six (6) years. The maximum repayment period shall be as follows:
a) New Car : 84 Months
b) Used Car : 72 Months
Motorcycle Loan
A confirmed Employee is eligible for a motorcycle loan based on the need to carry out
official duties or for other special reasons up to maximum of RM 5500.The maximum repayment
period shall be 72 months for a new motorcycle or 36 months for a used motorcycle.
Personal Computer Loan
An Employee shall be eligible for a maximum loan of RM4500 at 4% interest per annum
to purchase a personal computer complete with necessary software and the maximum repayment
period of the loan shall be 48 months.
Medical Treatment
The Company shall provide all Employees and dependents with free medical treatment
and medicine as provided by a panel doctor, Company clinic/ dispensary or government hospital.
Specialist medical treatment, inclusive of consultant and specialist fees and medicine, shall be
borne by the Company if and when referred by a panel doctor or government doctor.
Hospitalization
An Employee or dependent requiring hospitalization as referred by panel doctor,
government doctor and relevant specialist shall be accommodated in wards at hospital or clinic.
The Company shall meet the actual expenses incurred for ward charges and meals subject to a
maximum of RM 110 per day.
Dental Care

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 An Employee shall be entitles for dental treatment including medication that covers
extraction, scaling, root canal and filing only.

Employees Provident Fund

An Employee who joined the Company on or after 1 st January 2008, the Employee
Provident Fund (EPF) contribution rates of the Company shall be based on the years of service
with the Company as follows:

Employee's Length of
Company
Service with the
Contribution Rates
company
Less than 5 years 3% + 12% = 15%
5 to 10 years 5% + 12% = 17%
10 years or more 7% +12% = 19%

Retrenchment Benefits
1. Employees may be retrenched or declared redundant by the company on account of:
a) Company’s closure b) Change of corporate ownership
c) Diminished business volume d) Company’s reorganization
2. The affected Employees shall be entitled to a retrenchment benefit as follows:
“Factor” x Last Drawn Salary x Qualifying Service
Death Benefits
Where a confirmed Employee of the Company dies before reaching the compulsory
retirement age, payment of death benefits will be made to his next-of-kin or trustee, as below,
whichever is higher:
a) 2 x Last Drawn Salary x Qualifying Service
b) 36 x Last Drawn Salary
Disablement Benefits
A confirmed Employee of the Company, whose service is terminated for physical
disablement or chronic prolonged illness of a terminal nature before reaching the compulsory
retirement age, shall be paid disablement benefits, as below, whichever is higher:

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 a) 2 x Last Drawn Salary x Qualifying Service
b) 36 x Last Drawn Salary

7.0 Rewards and Recognition

For TNB, developing effective incentive plans is one of the major motivations for the
employees. There are three many practical considerations in developing an effective incentive
plan. TNB have annual bonus plans aimed at motivating the short-term performances of their
managers and executives. Performance ratings are obtained for each manager and preliminary
bonuses estimates are computed. Estimates for the total amount of money to be spent on short-
term incentives are thereby made and compared with the bonus fund available. If necessary, the
individual estimates are then adjusted.
Besides that, TNB also reward employee’s tenure with gift certificates and priceless souvenirs
for their long term service by hosting a dinner for these employees who have mostly been in the
company for over 10 years. TNB also have the best employee reward to recognize the
outstanding performance of the employees.

8.0 Training and Development

At TNB, training and development is determined through the changes that are needed for
the employees based on the job. In TNB, employees had to adapt to rapid technological changes,
improve product and service quality, and boost productivity to stay competitive. Improving
quality often requires remedial-education training, since quality improvement programs assume
employees can use critical thinking skills, produce chart and graphs, and analyze data.
Employees must also use or acquire skills in team building, decision making and
communication. Similarly, as TNB became more technologically advanced, employees require
training in technological and computer skills for the non –executive. These changes are designed
to create a highly competent workforce.

Some employees resist to these changes because they are much more comfortable in their
comfort zone and are use to the traditional working ways. An organization like TNB is an
organization skilled at creating, acquiring, and transferring knowledge and insights. Training and

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Development is crucial for fostering systematic problem-solving skills. At TNB, for instance a
non-executive, employee receives skill training in four areas. They are trained in using
techniques like interviewing and surveying to generate ideas and collect information, to reach
consensus by using special consensus building techniques, to analyze and display data on special
simple statistical charts, and to plan the actions they will take to solve the problem using special
planning charts. TNBs strategy of overcoming resistant to change is through inviting employee’s
participation and involvement in both the design and implementation phases of the change effort.
TNB believes that employees who are involved in the decisions understand them better and are
more committed to them. These non – executive employees whom are able to perform well in
their job will have the chance to be promoted to the executive level. This solely depends on their
skill, competency level as well as on the training received.

9.0 Issues & Recommendation

Three possible drawbacks to the casual incentive approach may include:

1. Jealousy among employees
(reward or incentive system should be transparent & the criteria of being reward or compensation
must be well informed to the employee, This is to ensure the employees feel that the are fairly
treated and reduce the level of jealousy among the employees as this might affect their working
performance.)
2. Feelings among workers that the supervisor may be acting out of favoritism.
(Activity such as OT must be carried out by rotation basis. This is to ensure that and everyone
gets the chance to do the same thing and to reduce the possibility of favoritism)
3. The use of rewards to maintain social distance.
There should be no discrimination or biasness in rewarding an employee. It must be purely based
on the employee’s performance and dedication towards his job. It not should be used as a tool to
distinguish one’s status and there shall be no differences among employees.
4. Others- Provide extra incentives (such as special allowance for them that go for training
related to their job and extra increment of 2-5% on their basic salary for them who obtained
certificates and recognition related to their job for the non executive employees that willing to
accept the future advancement program. This may encourage more skillful non executive
employees to aim high and take up the chances to be promoted to executive level.

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10.0 Conclusion

Compensation, including the overall system of rewards – formal and informal – provides the
driving force for effectively attracting, retaining, and encouraging human talent in an
organization. Important and fundamental practices for managing compensation includes
managing compensation strategically, considering performance-based pay where appropriate,
anticipating the influence of local culture, using a total rewards system perspective, and
addressing the duality challenge of global integration and localization. For TNB, the element that
determines the way the compensation strategy is adapted is based on the four important factors
which is the job, organization, employee and the environment.

11.0 References

1) TNB Employment handbook for non –executives 2008-2010.

2) Invostpedia website.
3) Compensation by HR online.

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