TOPIC:

COMPENSATION
ADMINISTRATION
KEY TERMINOLOGIES:
 Compensation- is the equivalent form that is given to the
individual for his work. It is also called job reward.

 Salary- refers to the payment for white-collar jobs. It includes

mental work. It is paid at stated intervals, such as every fifteen
days.

 Wages- refers to the payment for blue-collar jobs. It includes

manual labor. Wages are measured by hour, day or week.

 Wage and salary structure design is the establishment of job classes

and rate ranges.

 Blue collar – Manual laborers

 White collar – office workers

 Pink collar – Jobs associated with women like nursing, secretarial, etc.
This, being a rather sexist term, is no longer used.

 Pay level refers to the average pay for jobs, for departments, or for the
entire enterprise.

 BASE PAY is the biggest part of most employees' compensation is

usually their base pay and it is the amount on the employee's
pay stub labeled gross wages.

 VARIABLE PAY plans clearly tie pay to performance and puts

some proportion of the employee's pay at risk
 COMPENSATION PLANNING AND CONTROL FUNCTION: to coordinates
the components of compensation together in a coherent program
to help achieve the goals of organization and of employees.

 General compensation administration constitutes the creation

and management of coherent pay system. It also helps
compensation professionals to achieve the ultimate objectives of
compensation administration.

 PERFORMANCE APRAISAL is a method of evaluating the behavior of

employees in the work spot. It is a systematic and objective way of
evaluating both work- related behavior and potential employees.

 BENEFITS are any kind of compensation provided in a form other

than direct wages and paid for in whole or in part by an
employer, even those provided by a third party. Third-party
benefits include those offered by the government, which
disburses Social Security benefits that have been paid for by
employers.

Compensation

1. Compensation- is the equivalent form that is given to the individual for his
work. It is also called job reward.

2. History of Compensation

It started in ancient Sumeria where they outline the law of Ur-nammu (king). The law of Ur
provided monetary compensation for specific injury to worker’s body parts, including fracture. In
middle age, it was changed by feudalism.
In US (before 1900), the only recourse to a worker who was injured in the course of his
employment was to sue his employer. In 1911, they adopted Workmen’s Compensation Act. This
law is essentially a “no fault system”.

Basic Components of Compensation Program

1. Compensation Administration Program includes reward structure, its

philosophy and values.
Figure 1 on a separate page

A. Intrinsic reward- it provides direct satisfaction at the time of work. Example:

achievement and responsibility

B. Extrinsic rewards-are those which take place after work and which provide
a direct satisfaction at the time of work is done.

a. Direct compensation- includes salary and wage, overtime and holidays,

bonus, etc.

b. Indirect compensation- includes benefits like protection program,

services and discount for goods and services.

c. Non-financial compensation- includes material and physical equipment

which provides comfort and convenience to the employee.

2. Wage and salary

A. Salary- refers to the payment for white-collar jobs. It includes mental work.
It is paid at stated intervals, such as every fifteen days.

B. Wages- refers to the payment for blue-collar jobs. It includes manual labor.
Wages are measured by hour, day or week.

3. Factors affecting, determining and establishing pay rates

A. The relationship between job and wage rate. It involves the

qualifications required for jobs, duties and responsibility of the job.

B. The recognition of individual differences. Individuals doing the same

job differ in ability, experience, skill and efficiency.

C. Level of pay in the community. One way to attract and retain

competent and highly qualified workers is to maintain salaries at equal
rates for similar jobs in the same industry or with other firms.

D. Company’s ability to pay

E. Type of industry .Certain industry or business has greater earning

powers than other.

F. Cost of living. The purchasing power of money that the employee

receives from his employer determines the amount of essential needs
for decent living that the employee could provide himself and his
family.
 G. Minimum wages fixing

H. Labor costs. The significance of labor costs to an industry

depends on whether it is labor intensive or capital intensive.

I. Collective bargaining. Salary is determined through

management and union negotiation.

Theories of Wages

1. Classical Wage Theory- is based upon the fundamental concept that labor is a commodity and we
have to pay the price according to supply and demand.

2. The Just Wage of St. Thomas Aquinas- is described as wage which permits the recipient worker to
live in a manner in keeping with his position in society.

3. The Wage Fund Theory- holds the idea that the working capital of the nation provides a fund from
which wages can be paid. The fund is to be divided by all the workers proportionately.

4. Bargaining Theory of John Davidson- proposes that a labor is a commodity like anything that
could be bought at a price by the user. As a commodity, it carries with it a price that is determined
by the bargaining process between the buyer and seller.

5. The Marginal Productivity Theory- offers the best explanation of the wages in modern industry.
The supply of labor in any given economy on work and are available for work.

6. The Purchasing Power Theory- tries to establish the relationship between wages and the level of
economic activity.

7. Labor Theory of Value- emphasizes that labor is the source of all products and that without this
important component, there could be no goods for human consumption.

8. The Standard of Living Theory of Wages- means that wages should be based on the cost of living.

Reporter: EDISON, Rizel

WAGE AND SALARY SURVEYS

Most companies participate in wage and salary surveys or they conduct their own surveys.
Informal surveys maybe conducted through telephones and informal interviews. Formal salary and wage
surveys used questionnaires based on benchmark job that are also present in other companies and
industries. In the formal survey methods, the human resource department prepares a set of questionnaires
incorporating common job present in the company and is comparable with other jobs in other industries.

PROCEDURE IN CONDUCTING WAGE AND SALARY SURVEYS

Before embarking on a wage and salary surveys, the human resources department should study the
wage and salary data that are already available. In any request for survey data, each should be recognized
that job title alone is not good enough for matching jobs. Each job title should be accompanied with one
paragraph job descriptions so that it is possible to accurately compare jobs. In addition to the base salary,
the information should include data on shift premiums, over time payment practices, and methods of wage
payment.
STEPS IN CONDUCTING THE SURVEY

DEFINING THE LABOR

MARKET

LIST OF KEY JOB

POSITIONS
COLLECTION OF
SALARY DATA

DETAILED
DESCRIPTION OF JOBS

COMPILATION OF
SALARY DATA

RESULTS OF SURVEY

1. DEFINING THE LABOR MARKET

Establishing the boundaries of the pertinent labor market is the most critical
step in the survey procedure. It involves the selection of the industry or the firm
to be included in the survey.

2. LIST OF KEY JOB AND POSITIONS

This will ensure a representative sampling of the jobs that will be selected as
universal for a particular wage or salary survey.

3. DETAILED DESCRIPTION OF THE KEY JOBS

Key jobs are labor grades that are comparatively stable in duties and
responsibilities. These are occupation that are common in most industries and
scattered through the ladder of labor classification and commonly familiar to most
people in the industry.

4. COLLECTION OF SALARY DATA

 This maybe done through a set of questionnaires and supplemented by
interviews to get the accurate information. The information must be able to
pinpoint the problem area that has to be addressed by the compensation level,
compensation structure and the terms of payment plan.

5. COMPILATION OF SALARY DATA

The data gathered will provide management with the opportunity of arriving
at the arithmetical average, the median, and the range or rate paid and the
supplementary wage data.

6. RESULTS OF THE SURVEY

The results are properly evaluated and HRD prepares the corresponding
recommendations to the management of the most appropriate action to take
relative to the revisions of the current wage structure. Participating companies
are also provided with the summary of the findings to foster continuous
cooperation.

Several decisions to consider after the organization completes the salary survey
1. Whether the company should pay salaries above, below, or the same level as
the others in the same industry in the community are paying for the same
jobs.

2. Whether the company should pay a single rate for each job or slots the job
into ranges or grades which would provide room for merit increases.\

3. How many pay grades or salary ranges to use, and how wide each pay grade
should be.

4. What is the range of the amount in terms of money value that should be
allotted for each salary grade

THE DEVELOPMENT OF WAGE AND SALARY STRUCTURE

Wage and salary structure is the hierarchical arrangement of jobs with corresponding pay rates
attachment. Pay grades are assigned to the positions based on the result of the job evaluation and the
relationship between the derived pay system and the results of the salary survey.

Advantages of the wage and salary structure

1. It affects the worker's earning and standard of living.
2. It eases the recruitment and maintenance of an effective labor force.
3. It develops employee morale and increases work efficiency.
4. It represents cost and competitive advantage in the industry.
5. It helps in preparing budgetary allocations and eases computation of salary adjustments and as an
 aid in short term and long range plans.
6. It eliminates pay distortions and inequities in employee compensation.
7. It establishes an equitable salary range for various jobs.

WAGE STRUCTURE DESIGN

Wage and salary structure design is the establishment of job classes and rate ranges. All jobs
within a class are treated in the same way for economical administration purposes. Pay structure ranges
should be used in developing a schedule for both rank-and-file employees, technical and managerial
positions. Pay structure range for managerial positions are basically based on rank, depending upon their
assignments and contributions to the company's profitability index.

NOTE: The greater the differences in job classes, the greater should the number of pay grades in the salary structure.

After determining the pay structure, assigning employees to their proper job classifications
follows. If the job are properly evaluated and were developing before the implementation of any structure,
most existing salaries should fall within the salary range established for their jobs.
• Green circle rate refers to the employee's salary which falls below the minimum of the pay grade
for that specific job.
• Red circle rate, on the other hand, refers to the employee's salary which falls above the maximum
of the corresponding pay grade. Red circle rate can be handled in two ways:
a. Review the performance of the employee.
b. If the performance review reveals that the employee is not worthy to be promoted and such
salary increase was discreetly earned for some obvious reasons, then the employee will not get normal
merit increase due to the implementation of the new structure.
METHODS OF WAGE PAYMENT

The main purpose of a formal wage and salary management plan is to have a systematic method of
payment to ensure that employees receive a fair wage and salary for the work they performed.

There are two methods of paying salaries:

1. By the time worked – In this method, earnings do not fluctuate with the amount of work
performed or with the quality of output. Wages are computed in terms of unit of time worked. It is
also called non-incentive wage plan because the method of calculation will not immediately result
in more money.
Computation:
HxR=W
where H- hours actually worked
R- rate per hour in pesos
W- total wage earned

Payment on the basis of time worked is more satisfactory under the following conditions:
• Employees have little or no control over how much work they produced.
• There is no clear-cut relationship between the effort made to produce the work and the amount of
work produced.
• Work delays occur often and are beyond the employee's control.
• Quality of work is very important.
• Units of work produced cannot be distinguished and cannot be measured.

2. By the Amount of Work Produced- earnings depend on how much work the employee completes or on
related factor, such as the quality of work. This method is called an incentive wage plan. The most common
incentive plan is called piecework. Piecework salaries are determined by the number of pieces produced or
completed, and each piece is assigned a piece value that is called piece rate.
Computation for piecework salaries is as follows:
NxU=W
where N- number of units produced
U- rate per unit in pesos
W- wages earned per day or per week

Payment by piecework is satisfactory under the following conditions:

• When a unit of completed work can be measured easily;
• When there is a clear-cut relationship between a worker's effort and the results of his effort;
• When the quality of work is less important than the quantity, or when quality standards are
uniform and measurable and;
• When the flow of work is regular, breakdowns are few, and jobs follow a standard procedure, with
few interruptions.

Wage and Salary Policies

The company of any organization must have a clear-cut wage and salary policy. These policy
guidelines will help the organization have better relationships with employees and develop a more
comprehensive employee financial planning program. The wage and salary policy must appeal to all
employees and stimulate them to greater efforts.

These characteristics include the following:

1. The wage and salary plan must be easily understood. Every worker wants to
know how his company wage plan works. To keep employees in the dark as
to how their earnings are determined could lead to distrust on the
management and fear that they are not getting paid for what they have
earned.
2. Salaries in the wage plan should be easily computed. Most employees like to
compute, from to time, what they are earning, and to make sure that the
salaries are correct. Therefore, a wage payment plan should be simple
enough to allow quick calculations. The methods of wage payment must be
explained during the orientation program and employees must be made to
understand that wages are related to employees effort and productivity and
based on a wage plan that relates to duties and responsibilities of the
positions and other factors considered in the job evaluation program.
3. Salaries should be made relevant with efforts. Standards should be set and
can be reached by good workers. Standards should be set so as to challenge
a worker, making him reach for extra effort. Once he has achieved the
standard, he should be rewarded for this effort with increased earnings.
4. Incentive wage plans should provide payment for incentive earnings to
employees soon after they have been earned by efforts exerted to reach
standards. In this way, the reward or penalty is fixed in their minds in relation
to the work they do. Obviously, it would be too costly and unwieldy to
prepare a payroll every day. A weekly payment of wages is most reasonable.
5. The method of payment should be stable and unvarying. Frequent changes
in wage payment plans may lead workers to think that management is trying
to confuse and or even cheat them. It is important to choose a plan that will
fit the needs of the organization, so that they needs of the organization, so
that the necessity of frequent subsequent changes is eliminated.
Moral Renewal in the Workplace

1. Know the leaders have limitations.

Steven Berglas of the Harvard Medical School believes that “people who achieve great heights but
lack the bedrock character to sustain them through the stress are headed for disaster.”

2. Choose character
John C. Maxwell is right in his observation that, “We have no control over a lot of things in life.
We do not get to choose our parents. We don’t select the location or circumstances of our birth
and upbringing. We don’t get to pick our talents and IQ. But we do choose our character. In fact,
we create it every time we make choices.”

3. Walk the talk

Integrity is important in the workspace. In fact, many employers prefer to have employees with
integrity first, then, skills second. Skills can be taught but integrity is innate in one’s character.

4. Avoid Compromising
While life is not black or white but shades of gray, there are instances when you have to choose
between right and wrong. A wrong can never be right even if a compromised is reached.

5. Use the same measures on yourself

You want a leader who is not immoral, corrupt or incompetent. Exact the same measures or
standards on yourself. Be as harsh on yourself as you are in judging others. That you are just
follower is never an excuse for being lazy, incompetent or immoral.

6. Face the mirror

If you want one less scalawag in the workplace, reform yourself. Look for areas for improvement
in your character. If you have the guts, ask somebody you trust to tell you what is wrong in your
character.

Take the feedback positively as a gift for your improvement. Don’t rationalize but instead work at
developing after you.

7. Show the mirror to your leaders

If you want honest and concerned leaders, you might just have to show them
the mirror, too. Some of them might have blind spots and can’t see their
mistakes, shortcomings, and transgressions.

Remember that tyrants happen only when the led blindly accept tyranny or do not do anything
about it. To make leaders honest, they must know that they are also being watched and evaluated,
and that position and possessions are only temporal and empheral.

8. Don’t just admit mistakes; correct them

People who do not know that they are wrong cannot be corrected. The first step towards any form
of renewal is admission that there is need for correction.

Humility to admit mistakes is great but not enough. There must be correction. Even the bible
mains stiff-necked after many rebukes will suddenly be destroyed – without remedy.

9. Have an improvement plan

 Do not leave to chance the matter of improving yourself. Moral renewal does not happen by
accident. You must exert deliberate effort to mend the cracks in your character.

Task yourself to show improvement. Have reasonable milestone that you must monitor and check
regularly. Then, celebrate your little victories. But do not boast about your achievement if
humility is the virtue you are trying to instill in yourself.

10. Rebuild and do not slide back

Set your mind toward the future. Stop going back to your past, except to see how you have
progressed. Let your guideposts be milestones in the future and not how you were before.
If you have improved in a facet of your character, make sure that you don’t slide back.
Be not like the dog that eats his own vomit.

Never underestimate what ordinary people can do, especially when they heed the call of one
leader who has killed in dallas, almost four decades ago,”…ask not what your country can do for
you; ask what you can do for your country.”

Other Information Related to Wages

Labor and wages

The type of job one does and the financial compensation he or she receives are very important in
our society. Job type is linked to status as is wealth. While the type of job one performs is
arguably more important status wise then wealth

In the past we used to use the other descriptions to classify workers. The terms blue collar or
white collar employees were used to describe the type of vocation.

Blue collar – Manual laborers

Whit collar – office workers
Pink collar – Jobs associated with women like nursing, secretarial, etc. This, being a rather sexist
term, is no longer used.

Today we classify our work roles into three categories called labor grades. These labor grades are
described below.

Skilled labor – these are workers who have received specialized training to do their their jobs.
They have developed and honed a special skill and may or may not need to be licensed or certified
by the state.

Unskilled labor – these are workers who have received no special training and have few specific
skills. As our society has grown into an increasingly technological one, the members of this group
have developed more and more skills.

Professionals – arguably the elite of the labor grades, these are those workers who need an
advanced degree to do their jobs. Lawyers and teachers.

Theories of Wages and Salaries

*Traditional theory of wage determination

*Theory of Negotiated Wages
Reporter: AQUINO, Sherwin

MODEL & DETERMINANTS OF COMPENSATION DECISIONS

FIGURE 1-1 MODEL OF COMPENSATION DECISIONS AND DETERMINANTS

DETERMINANTS OF COMPENSATION

1. ECONOMIC CONDITION
• least partly related to compensation
• a major influence upon what an employee is paid
• impact of unions on the wages, both industry-wide and in each organization are tied to this
economic environment

2. SOCIAL ENVIRONMENT
• members of a society have ideas about the "worth" of different jobs, and these ideas need
to be taken into account which give an impact on compensation decisions
• the social environment has been changing dramatically along with the changing views of
the workforce which spurred the recent impact on compensation decisions and changes in
law

3. DYNAMICS OF PARTICULAR ORGANIZATION

• employee pay must be consistent within the organization's strategy and structure
 • organization's culture must helps determine the priority to be placed upon various
compensation goals
• organization's work-force characteristics influence the success of different compensation
programs

4. WORLWIDE INFORMATION HIGHWAY

• compensation and benefits is data perfectly suited to the Internet thus, one can expect
severe communication conflicts relating to competitive practices
• larger organizations are now administering their stock, salary, and incentive plans on a
worldwide basis via the Internet
• Internet is just about to give Compensation Administration a new identity and the smaller
organizations will gain this capability too

COMPONENTS OF COMPENSATION PROGRAM

1. WAGE LEVEL / PAY LEVEL

• It is an overarching factor that creates the competitive stance of the organization vis-à-vis the
labor market which determines how much the organization will pay for labor services, or what
its average pay will be. Pay level refers to the average pay for jobs, for departments, or for the
entire enterprise.
• An average pay must be set that will secure and keep a productive workforce and the major
considerations affecting the pay level are (1) public policy, (2) pay for comparable work in the
community or industry (usually called the "going rate"), and (3) company response to
economic, political, and social issues. These considerations may be weighed unilaterally or
together with the union(s) representing employees.

NOTE: The wage level of an organization is a response to the changing pressures of the labor market. If it is too low, the organization
may have difficulty attracting and holding qualified people. There may also be legal penalties from those charged with administering
minimum wage and public-contract laws. Unions within or seeking entry into the organization may exert pressure. If the pay level is
too high, on the other hand, the competitive position of the firm in the product market may suffer. In times of wage controls, too high
a level may bring government sanctions.

2. BASE PAY
• The biggest part of most employees' compensation is usually their base pay and it is the amount
on the employee's pay stub labeled gross wages.

Together the pay level and base pay involve external and internal standards. Pay level decisions ensure that the organization is in line
with the requirements of the external environment thus related to external competitiveness. While pay structure decisions ensure that
the pay for jobs is internally consistent thus related to internal equity.

3. VARIABLE PAY
• variable pay plans clearly tie pay to performance
• puts some proportion of the employee's pay at risk

PAY RATE = WAGE LEVEL + BASE PAY + VARIABLE PAY + BENEFITS

NOTE: The combination of these three components of compensation program and additional benefits provide pay rate for each
employee in the organization or what can be called as total cash compensation.

COMPENSATION PLANNING AND CONTROL

• FUNCTION: to coordinates the components of compensation together in a coherent program to help
achieve the goals of organization and of employees.

This function is becoming more important for two reasons. The first is the increased sophistication of
planning and control that is being reflected in the administration of Human Resources. This is particularly a
function of computerization which has allowed compensation administration to provide much more and
timely information. The second reason is that with the high cost of American labor, controlling this cost in
today’s competitive world is critical. In addition, legality in terms of pay discrimination requires
organizations to keep accurate data on their workforce.
INTERNATIONAL COMPENSATION AND RELOCATION

• International compensation or as it is called in most of the rest of the world,

remuneration has two aspects. The first is compensation of American
employees assigned to foreign operations, called expatriates. As American
industry continues to expand overseas to foreign countries in this era of
globalization the numbers of these employees' increases and the importance of
proper compensation for this group of employees becomes a new problem.
Moving employees to other countries raises a number of issues of equity, both
for the expatriate and for the local employees. And the second aspect is the
compensation of local employees and the differences of local customs and laws
that require adaptations to the compensation program of the organization.
• Relocation - compensation gets involved in this topic as it creates
labor costs to the organization. It also must deal with the equity
issue as labor rates and cost of living in different places differ.
Thus, there are considerations of whether local wage rates or cost
of living will prevail as the standard for setting pay. Relocation
may entail whole organizations as well as individual employees
and the decision as to whether this is a good idea is partially a
function of the cost of labor in each location.
http://www.eridlc.com/index.cfm?fuseaction=textbook.chpt01

COMPENSATION ADMINISTRATION MODEL

• General compensation administration constitutes the creation and management of coherent pay
system. It also helps compensation professionals to achieve the ultimate objectives of compensation
administration.

OBJECTIVES OF COMPENSATION ADMINISTRATION

1. EFFICIENCY
2. EQUITY
3. COMPLIANCE

BAIS OF PAY SYSTEM

1. INTERNAL CONSISTENCY
• OBJECTIVE: to determine equitable rates of pay by considering the similarities and
differences in work content or job skills as well as the different contributions employees with
different jobs and skill levels make to a company's goals.
• Internal consistency depends on how a company is structured

NOTE: The number of levels and the degree of pay differentials are based on three general criteria: the
value of a job and a job's responsibilities, the skills and knowledge needed, and job performance and
productivity. Employers can use these criteria to modify employee behavior by indicating what kinds of
responsibilities, performance, productivity, skills, and knowledge employees need to move into a different
level and receive a higher pay rate.

More specifically, six primary but interrelated factors can shape a company's pay
structure:
 1. Social Customs: Beginning in the thirteenth century, employees began demanding a "just" wage.
This idea evolved into the current notion of a federally mandated minimum wage. Hence,
economic forces do not determine wages alone.
2. Economic Conditions: Demand for labor influences employee wages. Employers pay wages based
on the relative contributions employees make to production goals. In addition, supply and demand
for knowledge and skills helps determine wages.
3. Company Factors: Pay structures depend on the kind of technology a company has and on whether
a company uses pay as an incentive to motivate employees to improve job performance and to
accept more responsibilities.
4. Job Requirements: Some jobs may require greater skills, knowledge, or experience than others and
hence fetch a higher pay rate.
5. Employee Knowledge and Skills: Likewise, employees bring different levels of skills and
knowledge to companies and hence they are qualified to work at different levels of a company
hierarchy and receive different rates of pay as a result.
6. Employee Acceptance: Employees expect fair pay rates and determine if they receive fair wages
by comparing their wages with their coworkers' and supervisors' rates of pay. If employees
consider their pay rates unfair, they may seek employment elsewhere, put forth little effort in their
jobs, or file lawsuits.
2. EXTERNAL COMPETITIVENESS
• how a company's rates of pay compare to those of its competitors
• achieving external competitiveness in the area of compensation means balancing the need to
keep operating costs (including labor costs) low with the need to attract and retain quality
workers

Compensation managers achieve external competitiveness by comparing wage levels within their industry, examining their companies'
resources and goals, and establishing their own pay levels accordingly. In general, companies can set their pay levels to lead, match, or
follow competitors' pay practices. Contemporary compensation policies include "variable pay," where pay levels reflect the fluctuation
of the firms' success or decline, and positioning as "employer of choice." "Employer of choice" emphasizes the total compensation
package, and may include employment security, educational opportunities, and the promise of intellectual challenges or latitude. In
practice, some employers use different policies for different units and/or job groups.

3. EMPLOYEE CONTRIBUTIONS
• This policy area involves the weight companies choose to place on employee performance in
determining a compensation program. This approach enables companies to give their
employees a measure of control over their compensation and ideally thereby influence their
performance. This policy assumes that employees are significantly motivated by pay, which
studies fail to confirm or refute conclusively. Nevertheless, pay studies suggest that pay is one
of several important employee motivators, just not the consummate one. Compensation based
on employee contributions generally is distributed on the basis of employee evaluations.

4. ADMINISTRATION
• The administrative policy refers to the tasks of compensation managers in designing and
implementing a pay program. Taking into consideration the previous three policies,
compensation managers must choose the components that they will include in a company's
compensation program—that is, which kinds of base pay, wage and salary add-ons, incentives,
and benefits they will offer employees with different jobs and skill levels. Administration also
involves determining whether the pay program will attract and retain needed employees
successfully, whether employees consider the pay program fair, how competitors pay their
employees and if competitors are more or less productive.

APPROACHES OF COMPENSATION ADMINISTRATION

1. CENTRALIZED APPROACH
• design and administration of compensation programs are performed by a single company
department
• drawback to the centralized approach is that a compensation program may suit general
corporate needs, but not individual department needs
 2. DECENTRALIZED APPROACH
• multiple company departments have the responsibilities
• approach may make it difficult to transfer employees from one department to another and
may bring about a lack of internal consistency
http://www.referenceforbusiness.com/encyclopedia/Clo-Con/Compensation-Administration.html

PERFORMANCE APRAISAL
• A method of evaluating the behavior of employees in the work spot. It is a systematic and objective
way of evaluating both work- related behavior and potential employees. It is also a process that
involves determining and communicating to an employee how she or he is performing the job and
ideally, establishing a plan of improvement.

ROLE OF PERFORMANCE APPRAISAL

1. ADMINISTRATIVE
• through facilitating an orderly means of determining salary increases and other rewards, and by
delegating authority and responsibility to the most capable individuals
2. INFORMATIVE
• fulfilled when the appraisal system supplies data to managers and appraises about individual
strengths and weaknesses
3. MOTIVATIONAL
• entails creating a learning experience that motivates workers to improve their performance

TRAITS OF AN EFFECTIVE PERFORMANCE APPRAISAL PROGRAM

1. PRAGMATIC
•it helps to ensure that the system will be easily understood by employees and effectively put into
action by managers
2. RELEVANT
• systems must identify and evaluate only the critical behaviors that contribute to job success or else
not specifically relevant to the job may result in wasted time and resources
3. UNIFORM
• allows a company to systematically compare the appraisals of different employees with each other

DECISIONS IN STRUCTURING APPRAISAL SYSTEM

1. WHAT SHOULD BE ASSESSED?

The actions and results that are measured will depend on a variety of factors specific to the company and
industry. Most importantly, criteria should be selected that will encourage the achievement of
comprehensive corporate objectives. This is accomplished by determining the exact role of each job in
accomplishing company goals, and which behaviors and results are critical for success in each position.
Furthermore, different criteria for success should be weighted to reflect their importance. Some
performance appraisal analysts recommend concentrating assessment on productivity and quality, which
can be objectively measured and compared. Focus on these two factors enable companies to determine if
workers are performing their tasks at an acceptable pace and if they are performing their tasks at an
acceptable level of quality. By assessing these factors, evaluators also can avoid biased appraisals.

2. WHO SHOULD MAKE THE APPRAISAL?

In determining who should address performance, managers of the performance appraisal system usually
select an employee's immediate supervisor to provide the assessment, which is then reviewed by a higher-
level manager or the personnel department. In addition, other appraisers may be selected depending on:
their knowledge of, and opportunity to observe, the appraiser’s behavior, their ability to translate
observations into useful ratings, and their motivation to provide constructive input about the employee's
performance. Other evaluators may include coworkers, subordinates, customers, or even the employees
themselves.

3. WHICH PROCEDURE(S) SHOULD BE UTILIZED?

After selecting performance appraisal criteria and evaluators, the designers of the system must determine
which assessment techniques to use. Numerous methods may be applied depending on the nature of the
industry, company, or job. As noted earlier, many organizations utilize a combination of several techniques
throughout the organization. In general, the most popular rating techniques fall into one of four categories:
(1) rating, in which evaluators judge workers based on different characteristics; (2) ranking, whereby
supervisors compare employees to one another; (3) critical incidents, in which evaluators create
descriptions of good and bad behavior and then assign those descriptions to employees; and (4)
techniques that use multiple or miscellaneous criteria, such as employee-directed standards.

4. HOW WILL THE RESULTS BE COMMUNICATED?

In addition to selecting evaluation techniques, managers of appraisal systems must devise a means of
effectively communicating the results of assessments to employees. Often, the communication process is
built-in to the appraisal technique, but sometimes it isn't. Feedback about performance is important for
improving worker behavior. For instance, a worker who receives a very positive appraisal will likely
become motivated to perform. On the other hand, a poor appraisal could have the opposite effect. For that
reason, assessors have a number of feedback techniques at their disposal to help ensure that the end
result of any assessment is constructive. Examples of feedback methods are written follow-ups, goal
setting to overcome deficiencies, and allowing workers to have input into their appraisal to explain reasons
for success or failure. Importantly, most feedback techniques stress a relationship between employees and
their negative behavior (i.e., employee still have value, despite their inadequate)

FORMS OF BIAS

1. CROSS-CULTURAL BIAS
• a consequence of an evaluator's expectations about human behavior
• those expectations often clash with the behavior of appraises who have different beliefs or cultural
values

For instance, an evaluator with an Asian heritage may be more likely to rate an older employee higher because he has been taught to
revere older people.

2. PERSONAL PREJUDICE
• results from a rater's dislike for a group or class of people and when that dislike carries over into the
appraisal of an individual, an inaccurate review of performance is the outcome

For example, according to Kurt Kraiger and J. Kevin Ford writing in the Journal of Applied Psychology, studies have shown that
black raters and white raters are much more likely to give high rankings to members of their own race

3. HALO EFFECT
• caused by a rater's personal opinions about a specific employee that are not job-related
• The term "halo" stems from the distortion of appraises, like an angel with a halo over its head, can
do no wrong. This type of bias, however, also applies to foes of the rater. The effect is particularly
pronounced when the appraises is an enemy or very good friend of the evaluator

4. LENEINCY AND STRICTNESS BIAS

• results when the appraiser tends to view the performance of all of his employees as either good and
favorable or bad and unfavorable
• the result of vague performance standards, they may also be the consequence of the evaluator's
attitudes

For example, some evaluators want their subordinates to like them (leniency bias) or want to feel like they are being a "tough judge"
(strictness)
5. ERROR OF CENTRAL TENDENCY
• occurs when appraisers are hesitant to grade employees as effective or ineffective
• they pacify their indecisiveness by rating all workers near the center of the performance scale, thus
avoiding extremes that could cause conflict or require an explanation

PERFORMANCE APPRAISAL TECHNIQUES

1. PAST ORIENTED
• Past-oriented techniques assess behavior that has already occurred. They focus on providing
feedback to employees about their actions, feedback that is used to achieve greater success in the
future

TRADITIONAL FORMS:
• RATING SCALES
For the rating scale, the evaluator simply checks a box beside each factor to indicate, for example, excellent, good, fair, or
poor. A value may be assigned to each level of success—a rating of fair, for instance, might be worth two points—and the
appraisee's score totaled to determine his or her ranking.
• CHECKLIST
For the checklist, the evaluator simply marks statements such as "works well with others" believed to describe the worker
being appraised.

ADVANTAGE: these techniques are inexpensive and easy to administer

DISADVANTAGE: they are: highly susceptible to all forms of bias; often neglect key job-related information and include
unnecessary data; provide limited opportunities for effective feedback; and fail to set standards for future success.

FAIRER APPROACH
• BEHAVIORALLY ANCHORED RATING SCALES (BARS)
They are designed to identify job-related activities and responsibilities and to describe the more effective and less effective
behaviors that lead to success in specific jobs. The rater observes a worker and then records his or her behavior on a BAR.
The system is similar to checklist methods in that statements are essentially checked off as true or false. BARSs differ,
however, in that they use combinations of job-related statements that allow the assessor to differentiate between behavior,
performance, and results. Therefore, BARSs can be more effectively utilized in the goal-setting process

ADVANTAGE: they are extremely job specific, easy to administer, and eliminate most biases
DISADVANTAGE: they can be difficult and expensive to develop and maintain

FORCED-CHOICE
• LIST OF PAIRED STATEMENTS
The statements in each pair may both be negative or positive, or one could be positive and the other negative. The
evaluator is forced to choose one statement from each pair that most closely describes the individual. An example of a pair
of statements might be "Always on Time" and "Never on Time."

ADVANTAGE: typically easy to understand and inexpensive to administer

DISADVNTAGE: they lack job relatedness and provide little opportunity for constructive feedback

CRITICAL INCIDENT EVALUATION TECHNIQUES

Require the assessor to record statements that describe good and bad job-related behavior (critical incidents) exhibited by the
employee. The statements are grouped by categories such as cooperation, timeliness, and attitude.

ADVANTAGE: it can be used very successfully to give feedback to employees and it is less susceptible to some forms of bias
DISADVANTAGE: difficult because they require ongoing, close observation and because they do not lend themselves to
standardization and are time consuming

FIELD REVIEW APPRAISAL

It entails the use of human resource professionals to assist managers in conducting appraisals. The specialist asks the manager and
sometime coworkers questions about an employee's performance, records the answers, prepares an evaluation, and sends it to the
manager to review and discuss with the employee.

ADVANTAGE: improves reliability and standardization because a personnel professional is doing the assessment and less susceptible
to biases.
DISADVANTAGE: generally expensive and impractical for most firms, and are typically utilized only in special instances—to
counteract charges of bias, for example
2. FUTURE ORIENTED
• future-oriented appraisal techniques emphasize future performance by assessing employees'
potential for achievement and by setting targets for both short- and long-term performance

MANAGEMENT BY OBJECTIVES (MBO)

One of the most popular performance appraisal techniques that is utilize and it is usually goal – oriented with the intent of helping
employees to achieve continuous improvement through an ongoing process of goal setting, feedback, and correction. As a result of
their input, employees are much more likely to be motivated to accomplish the goals and to be responsive to criticism that arises from
subsequent objective measurements of performance.

ASSESSMENT CENTER EVALUATION

It is a more complex assessment method that is usually applied to managerial or executive prospects. It is a system of determining
future potential based on multiple evaluations and raters. Typically, a group meets at a training facility or evaluation site. They are
evaluated individually through a battery of interviews, tests, and exercises. In addition, they are evaluated within a group setting
during decision-making exercises, team projects, and group discussions. . Assessment centers are susceptible to bias, have been
criticized as not being specifically job related, and are extremely costly. But they have also proven effective and have achieved broad
appeal in the corporate world.

PSYCHOLOGICAL TESTS
They are a much less intricate method of determining future potential. They normally consist of interviews with the employee and his
supervisors and coworkers, as well as different types of tests and evaluations of intellectual, emotional, and work-related
characteristics. The psychologist puts his or her findings and conclusions in a report that may or may not be shared with the employee.
Psychological testing is slow and costly, and must be administered extremely carefully because of the long-term implications of the
evaluation on the employee's future. Success is largely dependent on the skill of the psychologist.

SELF APPRAISAL
It entails employees making evaluations of their own performance. Although self-assessment techniques may also be coordinated with
past-oriented evaluations, they are particularly useful in helping employees to set personal goals and identify areas of behaviors that
need improvement. The advantage of such appraisals, which may be relatively informal, is that they provide an excellent forum for
input and feedback by superiors.

BENEFITS

• Employee benefits are any kind of compensation provided in a form other than
direct wages and paid for in whole or in part by an employer, even those
provided by a third party. Third-party benefits include those offered by the
government, which disburses Social Security benefits that have been paid for
by employers.
• They are an important means of meeting employee’s needs and wants.

THE PRIMARY ROLE OF BENEFITS: to provide various types of income protection to groups of
workers lacking income. Such income protection offers individual security and societal economic stability.
PRINCIPAL TYPES OF BENEFITS

DISABILITY

Benefits that provide disability income replacement include government programs such as
Social Security and workers' compensation. The bulk of these benefits are mandatory,
although numerous supplementary plans, most of which are tax favored, exist. Most
organizations seek to assemble a disability package that will provide adequate safeguards, yet
not act as a disincentive to return to work. A common objective is long-term income
reimbursement of 60 percent of pay, which is preceded by higher levels of reimbursement,
often as much as 100 percent during the first six months of disability. Long-term disability pay
typically ends at retirement age (when pension payments begin), or when the worker recovers
or finds another job. In addition, supplementary benefits such as disability insurance helps
employees weather periods without pay due to disabilities not covered by government
programs.
Other disability related incentives may include sick pay, including cash awards for unused sick
days at the end of the year. Employers may vary the quality of their disability package with
different copayment options, limits on payments for voluntary coverage, and extended
coverage for related health insurance, life insurance, and medical benefits related to the
disability.

MEDICAL

TYPES:
1. TRADITIONAL FEE-FOR-SERVICE PLANS
The insurer pays the insured directly for any hospital or physician costs for which the insured is covered.
2. PREPAID PLAN
Insurance companies arrange to pay health care providers for any service for which an enrollee has coverage. The insurer effectively
agrees to provide the insured with health-care services, rather than reimbursement dollars. Prepaid plans offer the advantages of
lower costs, which results in reduced administrative expenses and a greater emphasis on cost control. The most common type of
prepaid plan is the health maintenance organization.

RETIREMENT

SOCIAL SECURITY mandates that workers and employers jointly fund an account that is managed by
the federal government. The combined contribution totals about 15 percent of a worker's total salary. The
money is placed in the fund, and most of it is invested in interest-paying securities and bonds backed by
the government. The government pays benefits to beneficiaries when they reach retirement age. The
amount of expected benefits varies by age, with younger contributors expected to receive at least a
meager portion of their and their employer's total contribution.

PENSION PLANS are primarily financed by employers. Unlike the Social Security fund, funds created by
private employers are subject to strict government controls designed to ensure their long-term existence.
The two major categories of pension funds are defined benefit and defined contribution. Defined-benefit
programs represent the traditional approach where workers are assured a determined income level (given
expected Social Security disbursements) at retirement. The company finances the worker's account and
manages the investments. In contrast, defined-contribution plans utilize investment techniques such as
stock and bond purchases with an amount of money defined by the employer. Companies make regular
contributions to workers' accounts through those different instruments, and may also integrate employee
contributions. The employee simply receives the value of the contributions, with interest, at retirement.
The obvious benefits are deferred taxes and flexibility in comparison to defined-benefit programs.

SAVINGS PLANS these plans include various tax favored savings such as individual retirement accounts
(IRAs) and investment options. Employers may also provide retirement benefits such as retirement
counseling, credit unions, investment counseling, and sponsorship of retiree clubs and organizations.

UNEMPLOYMENT

SEVERANCE PAY it may take the form of a lump sum or continuing payments.

UNEMPLOYMENT PAYS PLANS these are employer-funded accounts designed to ensure adequate and regular payments
to workers, usually members of labor unions, during periods of inactivity.

SURVIVORS

Like disability compensation, benefits for the survivors of deceased employees are comprised primarily of
mandatory Social Security and workers' compensation benefits. Eligibility for such mandatory benefits is
determined by factors such as age, marital status, and parental responsibilities. In addition, however, a
plethora of different privately financed benefits are available for employer, most of which have a tax
favored status. Most plans are set up to make payments to a beneficiary designated by the employee.
Payment levels are usually contingent on the cause of death. For example, survivors of a worker killed
while on the job would likely receive much more than survivors of an employee who died at home or on
vacation. A common survivorship benefit is some form of term life insurance that takes advantage of tax
preferences and exemptions. Those plans often allow employees to contribute, thus significantly raising
the expected payoff at death.
Read more: Employee Benefits - expenses http://www.referenceforbusiness.com/encyclopedia/Eco-Ent/Employee-
Benefits.html#ixzz0vQcDql8I

Benefits fall into ten principal categories based on their function: educational,
employee incentive, family, government, health, lifestyle, recreational, retirement,
savings, and transportation benefits (examples provided below). While some benefits
are mandatory—those required by federal or state legislation—the majority are
supplementary. With supplementary benefits, employers choose whether or not to
offer them. Mandatory benefits provide economic security for employees who lack
income as a result of unemployment, old age, disability, poor health, or other factors.
Supplementary benefits not only serve as safety nets for employees, but also as
incentives to attract employees and to encourage employee loyalty.

Based on the book Employee Benefits: Plain and Simple, the major benefits included
in each category are listed below:

• Educational Benefits (Supplementary)

o Training/Continuing Education
o Tuition Reimbursement
o Personal Development
o Scholarships
• Employee Incentive Benefits (Supplementary)
o Anniversary Programs
o Bonuses
o Direct Deposit
o Parking
o Food Services
o Profit Sharing
o Discount Program
o Severance Pay
• Family Benefits
o Child Care (Supplementary)
o Family/Maternity Leave (Mandatory)
o Flextime (Supplementary)
o Accident Insurance for Children and Spouse (Supplementary)
o Home Purchasing Assistance (Supplementary)
• Government Benefits (Mandatory)
o Social Security
o Medicare/Medicaid
o Supplemental Security Income
o Unemployment Insurance
o Workers' Compensation
• Health Benefits (Supplementary)
o Medical Coverage
o Dental Coverage
o Vision Coverage
o Physical Examinations
o Sick Days
o Health Club Memberships
o Fitness Center
• Lifestyle Benefits (Supplementary)
o Bereavement Leave
o Dependent Life Insurance
 o Life Insurance
o Paid Holidays
o Reimbursement Accounts
o Vacation
• Recreational Benefits (Supplementary)
o Athletic Teams
o Country Club Membership
o Entertainment Bonuses: Theater or Sports Tickets
o Social Functions
• Retirement (Supplementary)
o Individual Retirement Accounts (IRAs)
o Pension Programs
o Retirement Advice
o Salary Deferral
• Savings (Supplementary)
o Credit Union
o Matching Savings
o Stock Options
o Thrift Savings
o U.S. Savings Bond Offers
• Transportation (Supplementary)
o Car Allowance
o Carpooling
o Company Car
o Mass Transit Passes
o Moving Expenses
o Relocation Assistance and Subsidies

EXAMPLES

Safety, along with quality and the

environment, is an important topic relating to
the very foundation of a corporation. Based
on the philosophy of "Respect for People,"
and the fundamental policy that "Safety is
management itself" and "it is everyone's
responsibility, from senior executives to every
employee at the workplace, to place safety
first," Toyota is making an effort to create a
safe and energetic work environment.

Safety and Health

Beginning with development of activities which demonstrate assurance of zero accident record, Toyota has developed a
range of independent accident prevention activities. Although the number of STOP6 1-type accidents and designated
occupational diseases2 in FY2002 were the fewest to date, the goal of zero was not reached. Nonetheless, through these
activities, results have been achieved in terms of workplace management and environmental improvements, including the
strengthening of workplace teamwork and the improvement in the inherent safety3 of equipment.
1. STOP6: Safety Toyota 0 (zero accidents) Project 6
Activities to prevent six types of accidents which may cause death or disability (caught in machines, contact with heavy
objects, contact with vehicles, falls, electrocution, and contact with heated objects)
2. Designated occupational diseases: Injury from dust and noise, or musculoskeletal disorders
3. Inherent safety: Completely eliminate or reduce the risk of accidents associated with work or equipment so as to pursue
intrinsic safety at the workplace at the equipment design stage

•Industrial Accident Frequency (Frequency Rate of Lost

Workday Cases)

*The figures for all industries, manufacturing industries

and the automobile industry for 2002 are preliminary

•Safety and Health Promotion Organization and Structure

Building Good Health
Toyota is conducting employee health checks, including items required by
law as well as its own items. In 2002, the percentage of completely healthy •Trend in Percentage of Completely Healthy
Toyota employees4 was only 55%, falling short of the goal of 70%. Employees
Participation in lifestyle guidance meetings, one measure toward early
recovery, was 75%, a lower percentage than the previous year. The ratio of
Toyota employees whose health-related work restrictions were lifted 5 to
those who participated in the lifestyle guidance meetings was, however,
twice as high as that of the previous year.
As an activity to prevent lifestyle-related diseases, Toyota is conducting a
lifestyle improvement campaign and recreational activities, through which it
is making efforts to promote better health. Toyota also provided education
and information to improve the awareness of each employee, which is
necessary to develop better lifestyles. In the future, Toyota will employ the
Meal Check System6 and begin instructing employees on how to improve their dietary habits and educating them thorough
self-management.
4. Completely healthy Toyota employees: Ratio of those with the A rank of health management ratings (no problems found
during health checks, and not receiving medical treatment)
5. The ratio of Toyota employees whose health-related work restrictions were lifted:
Number of employees whose health-
related work restrictions were lifted
×100
Number of participants in lifestyle
guidance meetings
6. Meal Check System: A system for confirming and evaluating individuals' food consumption patterns, using data of their
food and drink consumption in the cafeteria

Mental Health Care

Regarding mental health at the workplace, in addition to
education in traditional knowledge, all of the newly
appointed managers and supervisors undergo active
listening courses7 that are effective in the prevention and
early detection of mental problems. In FY2002, 810 newly
appointed department general managers, group managers,
and others at Toyota received this training.
Regarding individual mental health care, by strengthening Learning communication techniques at an active listening
ties among personnel, the workplace, and workers' course
families, Toyota is improving its follow-up system for
people who are on leave.
Through these activities, Toyota aims to create a
workplace with better communication in the future.
7. Active listening courses: Experiential training in
methods of building good communication through
understanding and sympathy for others' feelings and
emotions; a technique of active listening

With the on-going changes in the labor market environment, due to such factors as the globalization of
business and social advances of women, one major task for increasing a company's competitiveness is to
have management that can make use of human resource diversity. In 2002, Toyota started a Diversity
Project based on the concept expressed in Toyota's Global Vision 2010 of "promoting the creation of
environments featuring people from around the world with various abilities and values who are given the
opportunity to experience self-realization as individuals." Through this, Toyota aims to increase its
employees' motivation and optimize the value of its human resources.
See the Global Vision 2010

Toward Promotion of Women's Participation In 2002, based on the principle of respecting diversity and
with the aim of reforming management throughout the company, Toyota set its sights on women's
participation, reviewing its arrangement with regard to female employees, and taking steps to put a better
environment in place. In order to promote the creation of an environment more conducive to participation
by motivated female employees, Toyota has made a three-pronged effort to: (1) Help enable women to
work and raise children at the same time; (2) Assist in women's career building, and (3) Reform the
working environment and employee awareness. Toyota has also introduced flexible working arrangements
and constructed child-care facilities at business sites.
•System for Helping Employees Accomplish both Child •Trends in Number of Employees Taking Child Rearing
Rearing (or Nursing Care) and Work Leave
*A system similar to the child rearing system is used in the
case of nursing care

As of March 2003, Toyota had approximately 5,800 •Trends in Ratio of Female Employees
female employees, accounting for 9% of the total (Example of Administrative Positions)
workforce, but the number of women employed has
grown steadily each year as female students' awareness
increases.

Employment of Disabled Persons

As of March 2003, Toyota employed about 800 disabled •Trends in Toyota's Disabled People Employment Ratio
people in many kinds of positions at various workplaces.
Toyota believes in helping the disabled achieve
autonomy within society, and makes it a basic rule to
have them work together with other employees. Human
consideration is given to the conditions of their disability
at the business sites and ways are devised to
accommodate them in workplace facilities so as to create
a workplace environment that is safe and easy to work
in.
As of the end of March 2003, Toyota's disabled
employees ratio was 1.95%, exceeding the 1.8% Legal
Employment Quota.*
*Legal Employment Quota: In accordance with the "Law
for Employment Promotion, etc. of the Disabled,"
private companies normally employing 56 or more
employees are obligated to employ disabled people
(either physically or intellectually disabled) at a ratio
exceeding 1.8% of their total workforce

http://www.toyota.co.jp/en/environmental_rep/03/rinen.html#k02

McDonald’s Key Performance Indicator Summary1: Measuring Performance

Since first establishing key performance indicators in 2006, we have continued to

refine our approach to gathering and evaluating quantitative measures of our
performance. As part of this process, we recently implemented a centralized data
gathering system to further enhance the accuracy of the data we are reporting and
to make the performance measurement process more efficient for McDonald’s
personnel. As a result, we are able to continue expanding the number of markets
included in our reporting efforts.

In addition, we continue to evaluate options for additional and/or alternative key performance indicators
that contribute to our continuous improvement goals and meet the transparency expectations of our
stakeholders.

Employment Experience10

EMPLOYEE TRAINING AND DEVELOPMENT

Crew members satisfied that they receive the training needed to do a good job
Year 2005 2006 2007 2008
Percentage 80.611 82 84 8512
Managers who feel the person they report to supports their professional development
Year 2005 2006 2007 2008
Percentage 81.613 8214 8314 8212

Company owned restaurants with HU Certified restaurant managers

Year 2005 2006 2007 2008
Percentage NA NA NA 93.3
Worldwide top management team who started as crew members
Year 2005 2006 2007 2008
Percentage 42 42 42 42

MANAGEMENT OPPORTUNITIES FOR WOMEN

Company-operated restaurant managers who are women

Year 2005 2006 2007 2008
Percentage 44 46.2 49 47
Worldwide leadership (VP and above) team who are women
Year 2005 2006 2007 2008
Percentage NA 26.4 26.7 27

Community

PHILANTHROPIC ACTIVITIES (WORLDWIDE)

Total corporate cash & in-kind contributions

Year 2005 2006 2007 2008
Contributions in millions $13.3M $13.6M $10.6M $15.2M

LOCAL ECONOMIC IMPACTS

Total capital expenditures in Top Nine Markets (investments in new and existing restaurants)
Year 2005 2006 2007 2008
Investments in billions $1.6B $1.7B $1.8B 7
$1.8B7

SOCIAL TAXES

Total social taxes paid by McDonald's in Top Nine Markets

Year 2005 2006 2007 2008
Taxes Paid in millions $382.3M $493M7 $621M7 $616M7

INCOME TAXES

Total income taxes paid by McDonald's in Top Nine Markets

Year 2005 2006 2007 2008
Taxes Paid in millions NA NA $1.2B7 $1.1B7

Sustainable Supply Chain

SUPPLIER SOCIAL ACCOUNTABILITY (WORLDWIDE)

Food, packaging and tier-1 equipment suppliers that have affirmed our Code of Conduct for
Suppliers2,3
Year 2005 2006 2007 2008
% of Supplier facilities 89.0 93.5 92 954

ANIMAL WELFARE (WORLDWIDE)

Supplier meat (including beef, pork and poultry) processing plants audited
Year 2005 2006 2007 2008
# of Suppliers 521 562 513 4845

ENVIRONMENTAL IMPACTS OF CONSUMER PACKAGING6

Packaging used, by weight, per transaction count

Year 2005 2006 2007 2008
Amount in lbs. 0.1397 0.1388 0.1358 0.1299
Packaging material that is made from recycled paper
Year 2005 2006 2007 2008
Percentage 31.57 33.18 29.88 30.8

Nutrition & Well-being

OFFERING MENU CHOICE

Items, per market menu, that contain at least 1 serving of fruit or vegetables
Year 2005 2006 2007 2008
Average # NA 6.1 6.1 6.4
Items, per market menu, that contain at least ½ serving of fruit or vegetables
Year 2005 2006 2007 2008
Average # NA 9.9 10.9 11.4

PROVIDING NUTRITION INFORMATION

Nutrition information available In-restaurant

Year 2005 2006 2007 2008
% of Top 9 markets 100 100 100 100
Nutrition information available Out-of-restaurant
Year 2005 2006 2007 2008
% of Top 9 markets 100 100 100 100

1
Except as otherwise noted, figures are for our nine largest markets: Australia, Brazil, Canada, China,
France, Germany, Japan, the U.K. and the U.S. Organizational structures vary by market. McDonald’s Japan
is a publicly traded company and is approximately 50% owned by McDonald’s Corporation. Effective 2007,
McDonald’s Brazil is owned by a developmental licensee. Data for energy usage and greenhouse gas
emissions for 2008 is in the process of being verified.

2
Total number of suppliers varies from year to year based upon business needs. Includes suppliers
identified to and confirmed by our program management firm as having signed the Code. Data reported is
based on a cumulative total.

3
Beginning in 2010 we will report new, more informative KPI's related to our Supplier Code of Conduct. A
preview of our new reporting capability can be seen in Employee Welfare section of this report.

4
Beginning in 2008, this metric is being reported differently. Going-forward this metric will reflect only
suppliers identified as active in the system, having gone through the audit process and having affirmed
our Code of Conduct. This change is being made to more accurately reflect our current supplier base and
those suppliers that share our values by affirming our Code of Conduct.

5
See details on animal welfare audits for coverage and results of audits.

6
Consumer packaging does not include pre-packaged items such as salad dressings.

7
Not including Brazil.

8
Not including China.

9
In 2008, the report methodology for the US and Canada markets was changed; this resulted in overall
decrease in total packaging weight which was not solely attributed to changes in packaging design.

10
Data for restaurant employees are for company operated restaurants only.

11
Not including Australia, Canada, China, Japan.

12
Not including Canada.

13
Not including Australia, Canada, China, Japan, U.K..

14
Not including Japan, Canada

Benefits

We strive to hire and keep the brightest and the best. And to do that, we’ve put
together perks designed to make you smile — even before you pick up your
paycheck. From flexible schedules and competitive wages to management training
and investment opportunities, our benefits let you know you’re a valued part of our
team.

Restaurant Crew Benefits

You don’t have to achieve upper-level management status to reap the rewards. When
you’re a part of our restaurant crew, you’ll enjoy a competitive wage, a schedule that
fits your needs, a team that’s there to support you in every way, and a workplace
that’s close to wherever you need to be. It’s a great way to earn extra income for
anyone, from students to moms and dads.

• Competitive wages
• Free uniforms*
• Free or discounted meals
• Flexible hours
• Medical insurance*
• Prescription drug coverage*
• 24-hour nurse line access
• Vision discount*
• Available dental*

Additional Benefits

• Short-term disability*
• Term life insurance*
• 401(k)*
• Paid holidays*
• Vacation*
• Educational assistance*

*Subject to availability and certain eligibility requirements and restrictions. Talk to

your local franchise owner or restaurant manager to learn more.

Corporate Staff Benefits

Our benefits program is designed to attract, energize, reward and retain top talent—
the kind of people who will enhance our brand and produce solid results.

Your Health and Protection

Protecting your and your family's health and financial future is important. That's why
we offer the following plans:

Medical

McDonald’s offers three Preferred Provider Organization (PPO) medical plan options
that use the First Health network of providers. The plans have different benefit levels
and pay more for in-network covered costs than for out-of-network covered costs. All
three of the plans feature a prescription drug program and an unlimited lifetime
benefit maximum. In addition, the McDonald's medical plans cover preventive care,
including annual physical exams for employees and covered family members (up to
$400 per person per year), well-baby care, and child immunizations and inoculations.
In some areas, HMOs are also available.

Vision Supplement

Employees enrolled in one of the four McDonald's medical plans may elect the vision
supplement plan, which provides coverage for eyeglasses and contact lenses, plus a
mail-order contact lens replacement program, and discounts on Lasik laser vision
correction surgery.

Dental

Our dental plan allows employees to see the dentist of their choice and covers a wide
range of dental services. Preventive services, including sealants for children, are
covered at 90% with no deductible. Basic and major services are covered at 80%,
after a deductible. The plan also covers 50% of eligible orthodontia expenses for
adults and children after a one-time deductible.

Spending Accounts

The flexible spending accounts let employees set aside pre-tax dollars to pay for
certain health care and day care expenses. Employees can set aside up to $5,600 in
the Healthcare Spending Account for expenses not covered or only partially covered
by their medical and dental plans. For day care expenses that allow employees or
their spouses to work, they can set aside up to $5,000 in the Day Care Spending
Account.

Short and long-term disability

Both short and long term disability coverage is provided at no cost to employees.
Short term disability provides benefits if an employee cannot work for more than 10
consecutive days; how long benefits continue depends on the nature of the
employee's disability and years of service. Long term disability coverage replaces
60% of the employee's monthly base salary while he or she is disabled.

Employee and dependent life insurance

McDonald's provides basic life insurance of two times the employee's base salary at
no cost to the employee. In addition, employees can purchase additional life
insurance coverage for themselves (either term or universal life). Basic dependent
life insurance for their spouse or domestic partner and/or children is also provided at
no cost to the employees. And, if an employee elects optional life insurance for
himself/herself, he/she can purchase additional dependent life insurance coverage.

Accidental death and dismemberment insurance

AD&D covers employees if they die or are seriously injured in an accident.

McDonald's provides AD&D coverage equal to two times the employee's base salary.
If the employee elects additional life insurance coverage, he/she automatically has
an equal amount of optional AD&D coverage at no extra cost.

Travel and business travel accident insurance

McDonald's provides travel accident coverage of two times an employee's base
salary at no cost to employees. Travel accident insurance pays benefits in the event
of an accident when traveling for either business or personal reasons. McDonald's
also provides business travel accident insurance coverage for employees traveling on
company business, also at no cost. Depending on the employee's position, this
coverage is either $100,000 or $200,000 and is in addition to travel accident
coverage.

Your Pay and Rewards

Our pay and rewards program follows a "pay for performance" philosophy: The better
your results, the greater your pay opportunities.

Base Pay

Because employees' base pay is the most significant portion of their compensation,
McDonald's maintains the competitiveness of our base pay through an annual review
of both external market data and internal peer data. In our corporate, division and
region offices, McDonald's has a broadbanding compensation system. Broadbanding
allows for flexibility in terms of pay, movement and growth.

Incentive Pay

Incentive pay provides our employees with the opportunity to earn competitive total
compensation when performance meets and exceeds goals. For our corporate,
division and region offices, the Target Incentive Plan (TIP) links employee
performance with the performance of the business they support. TIP pays a bonus on
top of employees' base salaries based on business performance and their individual
performance.

Long Term Incentives

Long term incentives are granted to eligible employees to both reward and retain key
employees who have shown sustained performance and can impact long-term value
creation at McDonald's.

Recognition Programs

Our recognition programs are designed to reward and recognize strong performers.
For our corporate, division and region offices, these include the Presidents' Award
(given to the top 1% of individual performers worldwide) and the Circle of Excellence
Award (given to top teams worldwide to recognize their contributions for advancing
our vision).

Company Car Program

Our company car program provides eligible employees with a company car for both
business and personal use. If eligible, employees can choose from a variety of
vehicles, depending on their level within the company. The program covers the cost
of insurance, maintenance and repair.

http://www.mcdonalds.com/us/en/careers/benefits.html
LABOR
MANAGEMENT
RELATION
___________________________________________________________________
KEY TERMINOLOGIES:
 Labor- refers to the hired workers of an industry.

 Capital-refers to the owner or investors of an industry.

 Minimum Wage- Is the longest hourly, daily, monthly, wage that

employers may legally pay to employees or workers.

 DEPARTMENT OF LABOR AND EMPLOYMENT(DOLE)- this

department is responsible for the overall regulation of
employment in the Philippines.

 NATIONAL LABOR RELATIONS COMMISSION(NLRC)- it oversees

unfair labor practices allegations, job terminations, disputes and
other labor matters not strictly related to wage.

 Regional Tripartite Wages and Productivity Commission (RTWPB)-

its mission is to ensure a decent standard of living for workers
and their families, and contribute to the competitiveness of
enterprises through improve productivity of workers.

 Just wage- A salary is the instrument that permits the laborer to

gain access to the goods of the earth.

 Family wage- is a wage that is sufficient to raise a family on.

 Labor Union association of workers for the purpose of improving

their economic status and working conditions through collective
bargaining with employers

 Labor organization is any union or association of employees

which exists in whole or in pair for the purpose of collective
bargaining or of dealing with employers concerning terms and
conditions of employment
 Independent labor union--an active, functioning labor union
without any direct or indirect affiliation with any federation or
national union.

 Legitimate labor organization--any labor organization registered

with the Bureau of Labor Relations, and includes any branch or
local thereof.

 Company union-a labor organization whose formation or

administration is initiated, dominated, assisted or otherwise
interfered with by the employer, including the giving of financial
or other support to it or its organizers or supporters.

 Federation and National unions -- an affiance of a group of unions

in one industry in any area, region or country.

 Trade associations --labor organizations formed by ambulant,

impenitent and itinerant workers, self-employed people, rural
workers and those without any definite employers for their
mutual aid and protection

 Bargaining unit is "the legal collectivity for collective bargaining

purposes whose members have substantially mutual bargaining
interests in terms and conditions of employment as will assure to
all employees the exercise of their collective bargaining rights.

 A strike may be defined as any temporary stoppage of work by

the concerted action of employees as a result of an industrial or
labor dispute.

 Lockout means the temporary refusal of an employer to furnish

work as a result of an industrial or labor dispute.
 Picketing is the stationing of persons before the premises of an
establishment involved in a labor dispute, generally
accompanied by the carrying and display or signs, placards or
banners stating the issues involved in the dispute.

 COLLECTIVE BARGAINING AGREEMENT (CBA) - It has been

defined as the process negotiation between employer or
employees and employees’ organization or union to reach
agreement on the terms and conditions of employment for a
specified period.

 Arbitration- It is the submission for the determination of the

disputed matter to private official persons selected in the
manner provided by law or agreement.

 Mediation- The act of a third person who interferes between two

contending parties with a view to reconcile them and persuade
them to adjust or settle their disputes.

 LABOR RELATIONS LAW- these laws are concerned with

stabilization of relations of employer and employees and seek to
forestall and adjust differences between them.

 Labor relations is the study and practice of managing unionized

employment situations. In academia, labor relations is frequently
a subarea within industrial relations, though scholars from many
disciplines--including economics, sociology, history, law, and
political science--also study labor unions and labor movements.
In practice, labor relations is frequently a subarea within human
resource management.
LABOR

 Refers to the hired workers of an industry.

CAPITAL
 Refers to the owner r investors of an industry.

MINIMUM WAGE
 Is the longest hourly, daily, monthly, wage that employers may
legally pay to employees or workers.

GOVERNMENT REGULATORS
Department of Labor and Employment (DOLE)
This department is responsible for the overall regulation of
employment in the Philippines.
3 areas of authority
1. Promotion of employment and apprenticeship

2. Worker’s protection and welfare

3. Promotion and maintenance of industrial peace

DOLE is the primary government agency mandated to promote gainful

employment opportunities, develop human resources, protect workers
and promote their welfare and maintain industrial peace.

National Labor Relations Commission (NLRC)

This agency coordinates programs and policies with DOLE but is
otherwise a separate agency. The NLRC oversees unfair labor practice
allegations, job terminations, disputes, and other labor matters not
strictly related to wage. The NLRC serves as a quasi-judicial
mechanism, for hearing and adjudicating workers’ claims and it has
exclusive appellate jurisdiction over all cases decided by labor arbiters.

Regional Tripartite Wages and Productivity Commission

(RTWPB)
Republic Act No.6727,
Otherwise known as the “Wage Rationalization Act”, established the
creation of NPWC. Its mission is to “ensure a decent standard of living
for workers and their families, and contribute to the competitiveness of
enterprises through improve productivity of workers.”

National Wages and Productivity Commission (NPWC)

An attached agency of the Department of Labor and
Employment, is tasked to develop general policies and guidelines on
wages, incomes, and productivity, as well as to exercise technical and
administrative supervision over the Regional Tripartite Wages and
Productivity Boards.
Just Wage
 Is the legitimate fruit of work.

A salary is the instrument that permits the laborer to gain access

to the goods of the earth.

The simple agreement between employee and employer with

regard to the amount of pay to be received is not sufficient for
the agreed-upon salary to qualify as a 'just wage", because a just
wage 'must not be below the level of subsistence' of the worker:
natural justice precedes and is above the freedom of the
contract.

Family Wage
 is a wage that is sufficient to raise a family on. This contrasts
with a living wage, which is generally taken to mean a wage
sufficient for a single individual to live on, but not necessarily
sufficient to also support a family. As a stronger form of living
wage, a family wage is likewise advocated by proponents
of social justice.

Reporter: Adeth Villegas

Labor Union
• association of workers for the purpose of improving their
economic status and working conditions through collective
bargaining with employers
• trade union (British English) or labor union (American English) is
an organization of workers that have banded together to achieve
common goals such as better working conditions

Chief types of Labor Union

1. Horizontal – members are skilled in a certain craft
2. Vertical – members are workers in the same industry
regardless of their skills

Reasons why employees join labor union

• Compulsory union membership
• To serve protection of employee rights
 • Because their employers are union member, employees join to
not feel outcasts
• To serve people against abuses of employers as union leaders
• Stepping board for promotions
• Failure of management to realize human resources as its most

PART TWO LABOR RELATIONSHIPS LAW LABOR PROCEDURES

Source: Philippine Labor Law and Jurisprudence
http://www.livinginthephilippines.com/philippine_labor_law45.html

CHAPTER 1 LABOR ORGANIZATIONS

1. THE RIGHT TO SELF-ORGANIZATION.

• The right of labor to self-organization is guaranteed by the
Constitution in its Protection to Labor clause (Art. XIII, Sec. 3) which
provides that "It (the State) shall guarantee the rights of all workers
to self-organization..."Accordingly, all persons employed in
commercial, industrial and agricultural enterprises, as well as
employees of religious, medical or educational institutions, whether
operating for profit or not, have the right to sell-organization and to
form, assist or join labor organizations for the purpose of collective
bargaining.
• The right to self-organization is a collective right of labor, as
distinguished from freedom of association, which is an individual
right of workers.
• The right to self-organization was justified as "a necessary
development of the industrial revolution

2. LABOR ORGANIZATIONS.
• The law defines "labor organization" as "any union or association
of employees which exists in whole or in pair for the purpose of
collective bargaining or of dealing with employers concerning
terms and conditions of employment"
• Main purpose of labor organizations is collective bargaining.
Collective bargaining denotes preferential mode of resolving
industrial disputes (Art. XIII, Sec. 3 Const.) is corollary to the right
of self-organization. It infers the existence of a labor
organization, and denotes its role in fostering industrial peace.
Without this companion right, a labor union will have no voice or
power to express the workers interest before the employer,
rendering it inutile. With it, workers are enabled to negotiate with
 the employer on the same level and with more persuasiveness
than if they were to bargain individually and independently for
the improvement of their respective conditions.
• The other purposes of a labor union should be lawful. As
observed by the Supreme Court: "A labor union is wholesome if it
serves its legitimate purpose of settling labor disputes. That is
why it is given personality and recognition in concluding
collective bargaining commitments. But if it is made use of as a
subterfuge, or as a means to subvert valid commitments, it
outlives its purpose, for far from being an aid, it tends to
undermine the harmonious relations between management and
labor.

3. KINDS OF LABOR ORGANIZATIONS.

Kinds of labor organization under the Labor Code:
(a) Independent labor union--an active, functioning labor union without
any direct or indirect affiliation with any federation or national union.
This is the basic unit of organized labor.
(b) Legitimate labor organization--any labor organization registered
with the Bureau of Labor Relations, and includes any branch or local
thereof.
(c) Company union-a labor organization whose formation or
administration is initiated, dominated, assisted or otherwise interfered
with by the employer, including the giving of financial or other support
to it or its organizers or supporters. Such a union is unlawful, being the
result of an unfair labor practice.
(d) Federation and National unions -- an affiance of a group of unions in
one industry in any area, region or country. These are basically service
units or agents whose services can be dispensed with at will by local
unions. This is a matter of right independent of a contract in the
absence of enforceable provisions in the federation's constitution
preventing disaffiliation of a local union. Such disaffiliation is limited to
the 60-day "freedom period" before the expiration of a CBA
(e) Trade associations --labor organizations formed by ambulant,
impenitent and itinerant workers, self-employed people, rural workers
and those without any definite employers for their mutual aid and
protection (Art. 243, LC).

4. REGISTRATION OF LABOR ORGANIZATIONS.

Requirements for the registration of labor organizations as prescribed
by the Labor Code are:
(a) fifty pesos registration fee
(b) the names of its officers, their addresses, and the principal address
of the labor organization, the minutes of the organizational meetings
and the list of workers who participated in such meetings
(c) the names of all its members comprising at least 20 percent of all
the employees in the bargaining unit where it seeks to operate
(d) if the applicant union has been in existence for one or more years,
copies of its annual financial reports
(e) four copies of the constitution and by-laws of the applicant union,
minutes of its adoption or ratification, and the list of members who
participated in it (Art. 234, LU)
(f) a sworn statement that there is no certified bargaining agent in the
bargaining unit concerned. In case there is an existing CBA, a sworn
statement that the application is filed during the last 60 days of the
agreement
(g) the application, and all the accompanying documents, shall be
verified under oath by the secretary or the treasurer, as the case may
be, and attested to by the president.

NOTE: If the applicants are federations or national unions, they shall, in

addition to the above requirements, submit the following:
(a) proof of the affiliation of at least ten locals or chapters, each being
a duly registered collective bargaining agent in the establishment or
industry in which it operates, supporting the registration of such
application or federal union; and (b) the names and addresses of the
companies where the locals or chapters operate, and the list of all the
members in each company involved (Art. 237, LC).

A local or chapter of a federation or national union becomes a

legitimate labor organization only upon submission of the following: (a)
charter certificate, within 30 days from its issuance by the federation
or national union; and (b) the constitution and by-laws, a statement on
the set of officers, and the books of account, all of which are certified
under oath by its secretary or treasurer, as the case may be, and
attested to by its president. Absent compliance with these mandatory
requirements, the local or chapter does not become a legitimate labor
organization. (Progressive Development Corp. vs. SOLE, 242 SCRA
99.106) According to the Supreme Court, the intent of the law in
imposing lesser requirements in this regard is to encourage the
affiliation of a local union with a federation or national union in order to
increase the local union's bargaining power respecting terms and
conditions of labor (Id.).

Applications for registration are filed with the labor relations division f
the DOLE Regional Office concerned or with the Bureau of Labor
Relations. In the case of government employees" organizations, in
addition to such registration, they shall also register with the Civil
Service Commission (Sec. 7, Ex. 0 . NO. 180). Upon approval, their cox
Tsunami registration certificates shall be signed jointly by the
Chairman of the Civil Service Commission and the Secretary of Labor
and Employment (Sec. 8, Id.).

5. ACTION ON THE APPLICATION.

All applications for registration are acted upon within 30 days
from filing; the action thereon could be an approval or a denial. The
Regional Office or the Bureau of Labor Relations may deny the
application on grounds of noncompliance with the requirements for
registration (supra). The decision denying the application shall be in
writing, stating in clear terms the reason therefore, with a copy
furnished the applicant union. The applicant may appeal to the Bureau
the decision by me Regional Office or to the Secretary if the denial is
by the Bureau, within ten calendar days from receipt of such decision
on grounds of (a) grave abuse of discretion, and I or (b) gross
incompetence. If the application was filed with the Bureau, a motion
for reconsideration may be presented within ten days from receipt of
the decision.

The appeal shall be filed in the Regional Office or Bureau, as the

case may be, which shall cause the transmittal of the corresponding
records to the Bureau or the Secretary within five calendar days from
receipt of the appeal. The Bureau or Secretary shall decide the appeal
within 20 calendar days from receipt of the records of the case. Their
decision shall be final and no longer appeasable (Art. 235, 236 LC,
Secs. 5-6 Rule II, Book V, OR).

6. THE BARGAINING UNIT.

• Supreme Court definition of the term is "the legal collectivity for
collective bargaining purposes whose members have
substantially mutual bargaining interests in terms and conditions
of employment as will assure to all employees the exercise of
their collective bargaining rights.
• Another definition is: "a group of employees of a given employee
comprised of all or less than all of the entire body of employees,
which the collective interests of all the employees, consistent
with equity to the employer, indicate to be the best suited to
serve the reciprocal rights and duties of the parties under the
collective bargaining provisions of the law.

The factors involved in determining this concept are:

(a) the will of the employees (Globe Doctrine);
(b) affinity and unity of employees" interests, such as similarity of
duties and working conditions;
(c) prior collective bargaining history; and
(d) employment status, positions and categories of work.
Employer Unit Rule—the policy that is in favor from DOLE. It favors
larger units in the fixing of bargaining units where the employer unit is
the normal organization at the company level, thus discouraging
fragmentation into small craft or occupational units. Evidently, this
would simplify its work. Hence, its rules on representation issues
includes among the requirements in a petition for certification election,
"the description of the unit which shall be the employer unit, unless
circumstances otherwise require. . . "

7. BARGAINING UNITS IN COMPANY SPIN-OFFS.

In cases of company spin-offs, would the employees concerned
remain members of their original bargaining unit prior to the
spin-off?

This question was addressed by the Supreme Court in this manner: In

determining an appropriate bargaining unit, the test of grouping is
mutuality or communality of interests. The employees sought to be
represented by the collective bargaining agent must have substantial
mutual interests in terms of employment and working conditions as
evinced by the type of work they performed. Considering the spin-
loft's, the companies would consequently have their respective and
distinctive concerns in terms of the nature of work, wages, hours of
work and other conditions of employment.

8. SIGNIFICANCE OF REGISTRATION.
A legitimate labor organization, a registered labor union acquires the
following tights:
(a) to act as the representative of its members for the purpose of
collective bargaining;
(b) to be certified as the exclusive representative of all the employees
in an appointee bargaining unit for purposes of collective bargaining;
(c) to be furnished by the employer, upon written request, with his
annual audited financial statements, including the balance sheet and
the profit-and-loss statement, within 30 calendar days from receipt of
the request, after the union has been duly recognized by the employer
or certified as the sole and exclusive bargaining representative of the
employees in the bargaining unit, or within 60 calendar days before
the expiration of the existing collective bargaining agreement, or
during the collective bargaining negotiation;
(d) to own property, real or personal, for the use and benefit of the
labor organization and its members;
(e) to sue and be sued in its registered name; and
(f) to undertake all other actives designed to benefit the organization
and its members, including cooperatives, housing, welfare and other
projects not contrary to law.
The income and properties of legitimate labor organizations, including
grants, endowments, gifts, donations and contributions from fraternal
and similar organizations, local or foreign, which axe actually, directly
and exclusively used for their lawful purposes, shall be free from taxes,
duties and other assessments (Art. 242 LC, as am. by R.A. 6715).

R.A. 6715—includes the right to be furnished by the employer with his

financial statements, and the exemption from taxes and duties of a
union's income and properties, subject to the aforesaid conditions and
authorizes all unions to collect membership fees, union dues,
assessments and fines and other contributions for labor education and
research, mutual death and hospitalization benefits, welfare fund,
strike fund and credit and cooperative undertakings.

9. RIGHTS AND CONDITIONS OF UNION MEMBERSHIP.

Tights and conditions that apply to members of a labor organization
under the Labor Code are:

(a) No arbitrary or excessive initiation fees shall be required of

members of a legitimate labor organization, nor shall arbitrary,
excessive or oppressive fines and forfeitures be imposed.
(b) The members shall be entitled to full and detailed reports from
their officers and representatives of all financial transactions as
provided for in the constitution and by-laws or the organization:
(c) The members shall directly elect their officers, including those of
the national union or federation to which they or their union is
affiliated, by secret ballot at intervals of five years.
(d) The members shall determine by secret ballot, after due
deliberation, any question of major policy affecting the entire
membership of the organization, unless the nature of the organization
or force majeure renders such secret ballot impractical, in which case
the board of directors may make the decision in behalf of the general
membership.
(e) No labor organization shall knowingly admit as member or continue
in membership any individual who belongs to a subversive
organization or who is engaged directly or indirectly in any subversive
activity.
NOTE: A subversive is a person who is committed or engaged in a
movement to overthrow by violent means duly constituted authority.
This is obviously irreconcilable with unionism which is a democratic
concept.
(f) No person who has been convicted of a crime involving moral
turpitude shall be eligible for election as a union officer or for
appointment to any position in the union.
(g) No officer, agent or member of a labor organization shall collect
any fees, dues or other contributions in its behalf or make any
disbursement of its money or funds unless duly authorized by its
constitution and bylaws.
(h) Every payment of fees, dues or other contributions by a member
shall be evidenced by a receipt signed by the officer or agent making
the collection and recorded for this purpose.
(i) The funds of the organization shall not be applied for any purpose or
object other than those expressly provided by its constitution and by-
laws or authorized by written resolution by the majority of the
members at a general meeting called for the purpose.
(j) Every income or revenue of the organization shall be evidenced by a
record showing its source, and every expenditure of its funds
evidenced by a receipt stating the payee, the date, place and purpose
of such payment.
(k) Officers of the labor organization shall not be paid any
compensation other than the salaries and expenses due their
positions, as provided for in its constitution and by-laws, or in a written
resolution authorized by a majority of its members at a general
membership meeting called for the purpose.
(l) The treasurer and every officer responsible for the account of the
organization shall render a true and correct account of all monies
received and paid by him, and of all bonds, securities and other
properties entrusted to his custody, at least once a year within 30 days
after the close of its fiscal year, at such other times as may be required
by resolution of the majority of the membership, and upon vacating his
office.
(m) The books of accounts and other financial records of the
organization shall be open to inspection to any officer or member
thereof during office hours.
(n) No special assessment or extraordinary fees may be levied on
members unless authorized by a written resolution of a majority of all
members at a general meeting called for the purpose.
(o) Other than for mandatory activities under the Code, no special
assessments, attorney's fees, negotiation fees or any other
extraordinary fees may be checked oil" from any amount due an
employee without an individual written authorization duly signed by
the employee.
(p) Finally it shall be the duty of the union and its officers to inform its
members on its constitution and by-laws, the CBA, the prevailing labor
relations system, and all their rights and obligations under existing
labor laws.

10. WHO CAN JOIN LABOR UNIONS?

The following are eligible to join, assist or form labor organizations:
(a) Rank-and-ifie employees, whether employed for a definite period or
not, beginning on their first day of service
(b) Government employees in the civil service. High-level employees
whose functions are considered policy-making, managerial or highly
confidential in nature, are not eligible to join organizations of rank and-
ifie government employees. This right does not apply to members of
the Armed Forces of the Philippines, including police officers,
policemen, firemen and jail guards.
(c) Employees of government corporations established under the
Corporation Code
(d) Supervisory employees cannot join unions of rank-and-file
employees, but may form, assist or join labor organizations of their
own. Those who were members of existing labor organizations upon
the effectively of R.A. 6715 (March 21, 1989) were explicitly authorized
to remain therein under its Implementing Rules. Bank managers,
controllers and cashiers are not managerial, but supervisory
employees. Foremen fall squarely under the category of supervisory
employees and cannot be part of rank and file unions.
(e) Security personnel who are employees in relation to the
establishment of their employer.
(f) Aliens working in this country with valid employment permits, if
they are nationals of a country which grants the same or similar rights
to Filipino workers. The law allows them to join or assist (but not form)
labor organizations of their own choosing for purposes of collective
bargaining.

11. WHO CANNOT JOIN LABOR UNIONS?

The following are not eligible to join, assist or form any labor
organization:
(a) Managerial employees -- those vested with powers or prerogatives
to lay down and execute management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees. They
are distinguished from supervisory employees who, in the interest of
the employer, effectively recommend such managerial actions if the
exercise of such authority is not merely routinely or clerical in nature,
but requires the use of independent judgment
(b) Subversives or members of subversive organizations -- no labor
organization shall knowingly admit as members or continue in
membership any individual who belongs to a subversive organization
or who is engaged directly or indirectly in any subversive activity.
(c) Employees of cooperatives who are at the same time members
thereof---this is because members of a cooperative are deemed owners
of such cooperatives, and owners cannot bargain with themselves or
with their co-owners. But this exclusion does not apply to employees of
cooperatives who are not members or co-owners thereof.
(d) Employees who may be excluded by a CBA which classifies union
and non-union members
12. LABOR-MANAGEMENT COUNCILS.
The previously-held doubts concerning the validity of labor-
management councils, particularly in organized establishments, were
dispelled by Rep. Act No. 6715 which in creating the new right of
workers to participate in policy and decision- making process directly
affecting their rights, benefits and welfare, has allowed the formation
for this purpose of labor-management councils, provided the workers"
representatives therein be elected by at least the majority of all
employees in said establishment. Moreover, in establishments where
no legitimate labor organization exists, labor-management committees
(councils) may be formed voluntarily by workers and employers for the
purpose of promoting industrial peace. These specific functions of
labor-management councils make them compatible with those of labor
organizations.

13. CANCELLATION OF UNION REGISTRATION.

Grounds for cancellation of union registration under Labor Code:
(a) Misrepresentation, false statements or fraud in connection with the
adoption or ratification of the union's constitution and by-laws, or in
connection with the election of its officers.
(b) Failure to submit required documents within the period prescribed
by law;
(c) Acting as a labor contractor or engaging in the "cabo" system, or
otherwise engaging in any activity prohibited by law;
(d) Entering into collective bargaining agreements with times and
conditions of employment below minimum standards established by
law ("sweetheart contracts");
(e) Asking for or accepting attorney's fees or negotiation fees from
employers (also an Unfair Labor Practice);
(f) Other than for mandatory activities under the Code, checking off
special assessments or any other fees without duly signed individual
written authorizations of its members.

The Regional Office or Bureau shall serve notice of the cancellation

proceedings on the union concerned stating the grounds thereof at
least 15 calendar days before the scheduled date of heating. In such
hearing, the union representative shall have the right to present its
side. The union may, within 15 calendar days from receipt of the
decision, appeal to the Bureau or the Secretary, as the case may be,
on the grounds of grave abuse of discretion and/or gross
incompetence.

The Bureau or Secretary shall have 15 calendar days within which to

decide the appeal. The decision shall be final and unappeasable.
Cancellation of union registration is without prejudice to other
sanctions imposed by law, where applicable.

CHAPTER V STRIKES AND LOCKOUTS

I. INTRODUCTION.
The right to self-organization, and its companion right--the right
to collective bargaining, are accorded to labor to give it leverage in
dealing with the employer This is in recognition of the fact that these
parties are not placed upon a position of equality, but upon one of
inequa1ity Hence, the law grants these rights to labor to approximate
a semblance of equality in the relationship. However, organization and
negotiation by themselves may still be inadequate to achieve this
purpose. There is need for yet another element, which is the potential
to action by way of concerted activities. In a broad sense, the term
"concerted activities" means the activities of two or more employees
for the purpose of securing benefits or changes in terms and conditions
of employment, or for mutual aid or protection with respect to their
collective interests as employees. In its more common acceptance, the
term refers to organized union activities, such as strikes and picketing.
The resolution of industrial dispute through individual initiatives, like
collective bargaining, has the advantages of simplicity, certainty and
privacy. But concerted activities, because of their far-reaching
consequences to the economy and the larger social interests, are
subject to regulation. Thus, the pertinent Constitutional provision
grants to labor "the right to peaceful concerted activities, including the
right to strike in accordance with law" (Art. XIII, Sec. 3). It thereby
subjects this right to two conditions, namely: (a) that it be peaceful;
and (b) that it be in accordance with law. The Labor Code adds further
restrictions to the exercise of this right.

2. CONCEPTS.
• A strike may be defined as any temporary stoppage of work by
the concerted action of employees as a result of an industrial or
labor dispute.
• Lockout" means the temporary refusal of an employer to furnish
work as a result of an industrial or labor dispute.
NOTE: A lockout differs from a shutdown in that in a lockout the plant
continues to operate. The employee union-members locked out are
replaced by non-union substitutes and the plant continues to function.
In a shutdown, the plant ceases to operate by the willful act of the
employer himself. A lockout may affect all or less than all the
employee union-members. In its common acceptance, lockout is an act
directed at the union itself rather than at the individual members of
the union.
 • Picketing is the stationing of persons before the premises of an
establishment involved in a labor dispute, generally
accompanied by the carrying and display or signs, placards or
banners stating the issues involved in the dispute.

3. BASIC CHARACTERISTICS OF A STRIKE.

A bonified strike has the following characteristics:
(a) there must be an established employee-employer relationship
between the strikers and the person or persons against whom the
strike is called;
(b) the existence of an industrial or labor dispute between the parties,
motivating the use by labor of this economic weapon to persuade or
coerce compliance with the workers" demands; and
(c) despite the work stoppage, the employment relationship continues,
albeit in a state of "belligerent suspension".
NOTE: Strikes for the following purposes are illegal: to procure the
commission of an unlawful or criminal act, to compel an employer to
join a boycott, or to overthrow the government. Striking workers
generally have a right to be readmitted by their employer after a
strike, because the employment relationship remains intact. But in the
case of a protest resignation accepted by the employee should the
resigned employees reapply and are rehired, they cannot claim
seniority for their past service because the resignation had severed the
relationship.

4. RELEVANT FACTORS IN STRIKES AND LOCKOUTS.

Factors to consider in strikes and lockouts:
(a) Cause--there are three lawful causes for strikes, namely: bargaining
deadlocks, unfair labor practice, and union busting.
(b) Parry--any certified or duly recognized bargaining representative
may declare a strike in cases of bargaining deadlocks and unfair labor
practices. The employer may declare a lockout in the same cases. In
the absence of a certified or duly recognized bargaining
representative, any legitimate labor organization in the establishment
may declare a strike but only on grounds of unfair labor practice.
(c) Notice--in cases of bargaining deadlocks, a notice of strike or
lockout should be filed with the regional branch of the NCMB at least
30 days before the intended date thereof, with a copy served on the
other party. In cases of unfair labor practice, the period of notice shall
be 15 days. In union-busting cases, the 15-day cooling off period shall
not apply, and the union may take action immediately after the strike
vote is conducted and the result thereof submitted to the DOLE (Rule
XIII, Book V, OR). During the cooling-off period, it shall" be the duty of
the DOLE to exert all efforts at mediation and conciliation to effect a
voluntary settlement. Should the dispute remain unsettled until the
lapse of the requisite number of days from the mandatory filing of the
notice, the labor union may strike or the employer may declare a
lockout (Art. 263-c, LC).
(d) Strike/Lockout Vote-- a decision to declare a strike must be
approved by a majority of the total union membership in the
bargaining unit concerned, obtained by secret ballot in meetings or
referenda called for the purpose. A decision to declare a lockout must
be approved by a majority of the board of directors of the employer, a
corporation or association, or the partners in a partnership obtained by
secret ballot in a meeting called for the purpose. The decision shall be
valid for the duration of the dispute based on substantially the same
grounds considered when the strike or lockout vote was taken (Art.
263-f, LC).

The regional branch of the NCMB may, at its own initiative or upon the
request of any affected party, supervise the conduct of the secret
balloting. In every case, the union or the employer shall furnish the
regional branch of the Board the notice of the meetings referred to in
the such meetings, as well as the results of the voting at least seven
days before the intended strike or lockout, subject to the cooling-off
period provided in this Rule (Sec. 7, Rule XIII, OR).
The cooling-off period and the seven-day strike ban after submission of
the result of the strike vote are mandatory in character.This rule was
reiterated in a recent case where the Court held that the requirements
of the cooling-off period and the seven- day strike ban must both be
complied with, although the union may take a strike vote and report
the same within the cooling-off period.

5. LAST-DITCH CONCILIATION EFFORTS.

In an effort to avert a strike, the DOLE shall conduct a
referendum by secret balloting on the improved offer of the employer
on or before the 30th day of the strike. When at least a majority of the
union members vote to accept the improved offer, the striking workers
shall immediately return to work, and the employer shall thereupon
readmit them upon signing of the agreement. This is called "improved
offer balloting". In case of a lockout, the DOLE shall also conduct a
"reduced offer balloting", which is a referendum by secret balloting on
the reduced offer of the union on or before the 30th day of the lockout.
When at least a majority of the board of directors or trustees or the
partners holding the controlling interest in a partnership vote to accept
the reduced offer, the workers shall immediately return to work and
the employer shall thereupon readmit them upon signing of the
agreement.

6. STRIKES/LOCKOUTS IN MEDICAL INSTITUTIONS.

• strikes and lockouts in hospitals, clinics and similar medical
institutions shall, to every extent possible, be avoided, and all
 serious efforts, not only by labor and management but
government as well, be exhausted to substantially minimize, if
not prevent, their adverse effects on such life and health,
through the exercise, however legitimate, by labor of its right to
strike, and by management to lockout.
• in labor disputes adversely affecting the continued operation of
such hospitals, clinics or medical institutions, it shall be the duty
of the striding union or locking-out employer to provide and
maintain an effective skeletal work force of medical and other
health personnel whose movement and services shall be
unhampered and unrestricted, as are necessary to ensure the
proper and adequate protection of the life and health of its
patients, most especially emergency cases, for the duration of
the strike or lockout.
NOTE:In such cases, therefore, the DOLE may immediately assume,
within 24 hours from knowledge of the occurrence of the strike or
lockout, jurisdiction over the same or certify it to the NLRC for
compulsory arbitration. For this purpose, the contending parties are
strictly enjoined to comply with such orders, prohibitions and/or
injunctions as are issued by the DOLE or the NLRC, under the pain of
immediate disciplinary action, including dismissal or loss of
employment status or payment by the locking at employer of back-
wages, damages and other affirmative relief, even criminal prosecution
against either or both of them (Art. 263-g, LC). Evidently, the cause of
benefit and protection promoted by a strike or lockout is
overshadowed by the life and health needs of the public.

7. PROHIBITED ACTIVITIES IN STRIKES AND LOCKOUTS.

The Labor Code enumerates the following prohibited activities in a
strike or lockout:
(a) No labor organization or employer shall declare a strike or lockout
without first having bargained collectively in accordance with Title VII
of this Book or without first having filed the required notice or without
the necessary strike or lockout vote first having been obtained and
reported.
(b) No strike or lockout shall be declared after assumption of
jurisdiction by the President or the Secretary, or after certification or
submission of the dispute to compulsory or voluntary arbitration or
during the pendency of cases involving the same grounds for the strike
or lockout.
(c) No person shall obstruct, impede or interfere with by force,
violence, cornicing, threats or intimidation any peaceful picketing by
employees during any controversy or in the exercise of the right to
self-organization or collective bargaining, or shall aid or abet such
obstruction or interference.
(d) No employer shall use or employ any strike-breaker, nor shall any
person be employed as a strike-breaker.
(e) No public official or employee, including officers and personnel of
the AFP or the PNP or armed person shall bring in, introduce or escort
in any manner any individual who seeks to replace strikers in entering
or leaving the premises of a strike area, or work in place of the strikers.
(f) No person engaged in picketing shall commit any act of violence,
coercion or intimidation, or obstruct the free ingress to or egress from
the employer's premises for lawful purposes, or obstruct public
thoroughfares.

8. INJUNCTIONS AGAINST STRIKES AND LOCKOUTS.

The general rule on this matter is that no court or entity shall enjoin
any picketing, strike or lockout, except as provided in Arts. 218 and
263 of the Code (Sec. 12, Rule XIII, OR). The articles referred to:
(a) empower the NLRC to enjoin or restrain any actual or threatened
commission of any or all prohibited or unlawful acts or to require the
performance of a particular act in any labor dispute;
(b) authorize the DOLE, when in his opinion there exists a labor dispute
causing or likely to cause a strike or lockout indispensable to the
national interest, to assume jurisdiction and decide it or certify the
same to the NLRC for compulsory arbitration, either of which shall have
the effect of automatically enjoining the intended or impending strike
or lockout as specified in the assumption or certification order (Ait 263-
g, LC).
(c) acknowledge the power of the President to determine the industries
that, in his opinion, are indispensable to the national interest, and to
intervene at any time and assume jurisdiction over any such labor
dispute m order to settle or terminate the same.

In all the above instances, the legal effect is to enjoin or restrain a

strike or lockout.

The procedure for securing a temporary or permanent injunction from

the NLRC is prescribed in Art. 218(e) of the Labor Code. The
requirements include notice and hearing, opportunity for or-
examination, presentation of evidence, and a finding that prohibited
acts are threatened or being committed which, if not restrained or
performed forthwith, may cause grave or irreparable injury to
complainant's property or render ineffectual any decision in favor of
such party.

9. LEGALITY OR ILLEGALITY OF STRIKES AND LOCKOUTS.

Jurisprudence has established definite criteria to determine the legality
or illegality of strikes and lockouts. These criteria are taken up
individually below.

A. A lawful cause, ground or motive.

The Labor Code allows the following as lawful causes for a strike or
lockout: bargaining deadlocks, unfair labor practice, and union-busting.
However no labor union may strike, no employer may declare a lockout
on grounds involving inter- union and intra-union disputes.

B. Violation of Law, Judicial Order or a CBA.

The cooling-off period and the seven-day strike ban after submission of
the strike vote is mandatory. A strike is illegal for lack of strike notice,
no strike vote, and no notice of result and no valid ground. It does not
justify reinstatement since no good faith is involved. Compliance with a
return-to-work order issued by the Secretary of Labor is not a matter of
option or voluntaries, but of obligation. The real reason of the order is
to prevent impairment of public interest. Striking workers who refuse
to obey the order are not entitled to pay for work not done, nor to
reinstatement to the positions they abandoned by their refusal to
return as ordered.

A strike is illegal where the union continued it even after the DOLE
certified the dispute to the NLRC for compulsory arbitration. Such
certification has the effect of automatically enjoining the strike. What
makes such open defiance more glaring was the union's persistence in
continuing with the strike despite two return-to-work orders of the
Minister of Labor.

A no-strike, no-lockout provision in the CBA is a valid stipulation. A

strike violating this provisoin is illegal. But this may be invoked by an
employer only when the strike is economic in nature, or one conducted
to force wage or other concessions from the employer that are not
mandated to be granted by the law. It would be inapplicable to prevent
a strike which is grounded on ULP.

If there is a no-strike clause in the CBA, a slowdown is inherently illicit

and unjustifiable. It is a partial or limited strike, for the workers to
remain at their positions and accept the wages paid to them, but select
the tasks they care to perform or refuse openly or secretly to do other
work to the employer's damage. Since slowdown is a limited strike, it
violates the no-strike clause of the CBA which is the law between the
parties. A strike is likewise illegal if it is in violation of a CBA providing
for conclusive arbitration clauses.

C. Means or Methods Employed.

Although a strike or lockout may have a lawful cause or purpose, this is

not conclusive as to its legality. It may still be declared illegal if it is
carried out through unlawful means such as when force, coercion,
intimidation, violence with physical injuries, sabotage, malicious
mischief, damage to property, breach of the peace, and if the use of
unnecessary and obscene language or epithets were committed in its
course.

Commission of any of the prohibited activities described in Art. 264 of

the Code will render a strike or lockout illegal. The actual or threatened
commission of any such acts may be enjoined or restrained by the
NLRC (Art. 218-c, LC). The law does not expressly ban strikes except
when enjoined against by a tribunal; but if a strike is carried out
through unlawful means, the law will not sanction it and the court will
declare it illegal, with adverse consequences to the strikers.

Wherein carrying out the strike coercion, force, intimidation, violence

with physical injuries, sabotage, and use of unnecessary and obscene
language or epithets were committed by union-officials and members
in an attempt to prevent the other willing workers from going to work,
a strike held under these circumstances cannot be justified in a regime
of law for that would encourage abuses and terrorism, and would
subvert the very purpose of the law which provides for arbitration and
peaceful settlement of labor disputes.

A strike carried out with coercion, force, intimidation, violence with

physical injuries, sabotage and use of obscene language or epithets is
illegal.

A strike otherwise valid, if violent in character, may be placed beyond

the pale of the law. But to avoid rendering illusory the recognition of
the right to strike, responsibility in such a case should be individual
and not collective if the existence of force while the strike lasts is not
pervasive and widespread, consistently and deliberately resorted to as
a matter of policy.

It has been ruled that strikers who engaged in violent, illegal and
criminal acts such as hijacking buses, injuring commuters, puncturing
tires, stealing expensive equipment, had lost their employment status.
The Labor Code considers the commission of these acts a "prohibited
activity", and any worker or union officer .who unknowingly
participates in their commission during a strike may be declared to
have lost his employment status. However, although the strike was
illegal because of the commission of illegal acts, only union officers
and strikers who engaged in violent illegal and criminal acts against
the employer are deemed to have lost their employment status. Union
members who were merely instigated to participate in the illegal strike
should be treated differently.

10. CONSEQUENCES OF STRIKES AND LOCKOUTS.

The liabilities of striking workers are stated in the text of the Labor
Code.
Thus: Any union officer who knowingly participates in an illegal
strike and any worker or union officer who knowingly participates in
the commission of illegal acts during a strike may be declared to have
lost their employment status (Art. 264-a. LC). The law, in using the
work "may", grants the employer the option of considering a union
officer who participated in an illegal strike as having lost his
employment. The penalty of dismissal for participating in an illegal
strike is limited only to the union leaders. An ordinary striking worker
cannot be terminated for mere participation in an illegal strike. There
must be proof that he committed illegal acts during a strike; a union
officer may be terminated for both acts. Thus, rank and file workers
who were merely misled in supporting illegal strikes should be
reinstated, but they should not be compensated for services skipped
during the illegal strike. Hence, striking Workers incur no liability for
the said strike. They cannot be held responsible for an illegal strike on
the basis of such membership. Only the officers of the union who
staged the illegal strike deserve to be punished. Similarly, a union
member may not be held responsible for the union's illegal strike on
the sole basis of such membership or on account of his having voted
affirmative for holding of the strike later declared illegal. There must
be a clear proof of actual participation in the illegal strike. A mere
finding of the illegality of strike should not be automatically followed by
a wholesale dismissal of strikers from their employment. This is
because of the security of tenure provision under the Constitution.
Workers defying a return-to-work order cannot be replaced.

RIGHTS OF LABOR

The Philippines is signatory to the United Nations International

Covenant on Economic, Social and Cultural right. We cite those
pertaining to labor:
 1. The state parties to the present covenant recognize the right to
work, which include the right of everyone to the opportunity to
gain his living by work which he freely choose or accepts, and
wills to appropriate steps to safeguard this right.

2. The state parties to the present covenant recognize the right of

everyone to the enjoyment of just and favorable conditions of
work.

3. The state parties to the present covenant undertake to ensure

the right of everyone to form trade union and join the trade
union of his choice subject only to the rule of the organization
concerned, for the promotion and protection of his economic and
social interests.

BASIC DUTIES OF WORKERS

Conscience dictates the duties of worker. It is conscience because it is

impossible for everyone not to have an inkling of these duties, namely:

1. Work honestly and comply with all requirements.

2. Never injure capital, nor steal from the employer.
3. Never outrage the person of the employer.
4. Never employ deceit or violence in presenting the cause.
5. Never consort with the “agitators” or men of evil principles.

BASIC DUTIES OF EMPLOYERS

Employers have sacred task of caring for their workers. The following
are their basic duties toward their employees:

1. Respect the human dignity of the workers.

2. Appreciate their work.
3. Never treat them as slaves for making money.
4. Never assign them a tasks beyond their strength, do not employ
them in work not suited to their sex.
5. Give them commensurate wages.
6. Provide for their health and social recreation.
7. Provide them time to practice their religion.
8. Instruct them on how to use their money wisely.
9. Instruct them to love their family.
 10. Provide them with opportunities.

Reporter: Ngo, Earlson

1. Labor Relation Laws

- These laws are concerned with stabilization of relations of

employer and employees and seek to forestall and adjust
differences between them by the encouragement of collective
bargaining and settlement of labor disputes through
conciliation, mediation, and arbitration.

2. Parties to Labor Relations Cases

- Labor relations’ case involves three parties : the employees’

organization, management and the public and each has
certain rights. The Civil code of the Philippines expressly
provides neither capital nor labor shall act oppressively
against each other, or impair the interest or convenience of
the public.

3. Collective Bargaining

- It has been defined as the process negotiation between

employer or employees and employees’ organization or union
to reach agreement on the terms and conditions of
employment for a specified period.

- It covers the entire range of organized relationships between

employers and employees represented by unions; this
includes the negotiation and administration, interpretation or
application of the labor contract.

- It is a dynamic and continuous process; it does not end with

the execution of a collective bargaining agreement.

- It has an important standard-setting function; together with

the law, it constitutes the main source of regulations
 governing wage, hours of work, and other terms and
conditions of employment.

4. Arbitration

- It is the submission for the determination of the disputed

matter to private official persons selected in the manner
provided by law or agreement.

- Compulsory arbitration is that which occurs when the consent

of one party is enforced by statutory provisions.

- Voluntary submission is an agreement by which parties agree

to submit their differences to the decision of referee or
arbitrator. It is sometimes termed as ‘reference’.

5. Mediation

- The act of a third person who interferes between two

contending parties with a view to reconcile them and
persuade them to adjust or settle their disputes

6. Labor Relationships Policy Prior to Labor Code

a. Regime of Compulsory Arbitration

b. Shift Collective Bargaining

7. Labor Relations Policy Under the 1987 Constitution

- Section 3of Article XIII of the 1987 Constitution guarantees to

all workers the right among others to self-organization,
collective bargaining and negotiation, peaceful and concerted
activities including the right to strike in accordance with the
law, and to participate in policy and decision-making
 processes affecting their rights and benefits as may be
provided by the law. The State also mandates, under this
provision, to promote the principle of shared responsibility
between the workers and the employers and the preferential
use of voluntary modes of settling disputes, including
conciliation.

Collective Bargaining and Administration of Agreements

Procedure of Collective Bargaining (Art. 250)
The following are procedures in collective bargaining:
a. When a party desires to negotiate an agreement, it shall
serve a written notice upon the other party with a statement
of its proposals. The other party shall reply thereto not later
than ten (10) calendar days from receipt of such notice;

b. Should differences arise on the basis of such notice and reply,

either party may request for a conference which shall begin
not later than ten (10) calendar days from the date of request;

c. If disputes are not settled, the Board shall intervene upon

request of either or both parties or at its own initiative and
immediately call the parties to conciliation meetings. The
Board shall have the power to issue subpoenas requiring the
attendance of the parties to such meetings the Board may
call;

d. During conciliation proceedings with the Board, the parties

are prohibited from doing any act which may disrupt or
impede the early settlement of the dispute; and

e. The Board shall exert all efforts to settle disputes amicably

and encourage the parties to submit their case to a voluntary
arbitrator. (As amended by R.A. 6715)

ART. 251 Duty to bargain collectively in the absence of

collective bargaining agreements. –In the absence of collective
bargaining agreement or other voluntary agreement providing
for a more expeditious manner of collective bargaining, it shall
be the duty of the employer and the representatives of the
employees to bargain collectively in accordance with the
provision of this code.
ART. 252 Meaning of duty to bargain collectively means the
performance of a mutual obligation to meet and confer promptly
and expeditiously in good faith for the purpose of negotiating an
agreement with respect to wages, hours of work and all other
terms and conditions of employment including proposals for
adjusting any grievances or questions arising under such
agreement and executing a contract incorporating such
agreement if requested by either party, but such duty does not
compel any party to agree to a proposal or to make any
concession.
1. Duty Requires Reasonable Efforts to Reach
Agreement
True collective bargaining involves more than the
holding of conferences and the exchange of
pleasantries. While the law does not compel the parties
to reach an agreement, they must approach the
negotiations with an open mind and make reasonable
grounds of agreement. Proposals must be matched with
counter proposals.

2. Sphere of Collective Bargaining

Under the foregoing article, the obligation of the parties
to bargain collectively covers “wages, hours of work and
all other terms and conditions of employment including
proposals for adjusting any of the aforesaid subjects
constitutes unfair labor practice. Conversely, a party’s
insistence to negotiate on matters having no reasonable
relation to the above-mentioned subjects would also
constitute an unfair labor practice.

3. Usual Provisions, Stipulations and clauses in a

Collective Bargaining Agreement
The duty to bargain collectively includes, according to
the foregoing article, the duty to execute a contract
incorporating their agreement, if this is required by
either party. This contract is called Collective Bargaining
Agreement (CBA). The provisions, stipulations and
clauses usually found in the CBA are the following:

a.Definition of Collective Bargaining Unit – This

is a statement of the scope of the appropriate bargaining
unit covered by the agreement and of the positions
included and excluded from the unit.
 b.Union Security Clause – This is intended to
maintain the strength of the contracting union during the
life of the agreement and safeguard it against the perfidy
or fickleness of its own members and incursions by the
employer.
c. Check-off Provision – Pursuant to this provision
the employer undertakes to deduct from the wages of
union members union dues and other assessments and
remit the same to the treasurer of the union.
d. Management Prerogatives Clause – The rights
and prerogatives of the company are enumerated in this
provision.
e.Economic Benefits – Provisions granting
economic benefits to the employers such as increases,
vacation and sick leaves and hospitalization and
retirement.
f.Provision on Administration of Agreement –
Article 260 of the Labor Code requires the parties to
include in their agreement provisions to ensure mutual
observance of the terms and conditions of the agreement
and to establish a machinery for the adjustment of
grievances.

Labor relations is the study and practice of managing

unionized employment situations. In academia, labor relations is
frequently a subarea within industrial relations, though scholars from
many disciplines--including economics, sociology, history, law, and
political science--also study labor unions and labor movements. In
practice, labor relations is frequently a subarea within human resource
management.

CHINA

In China there exist labor laws which, if fully enforced, would

greatly alleviate common abuses such as not paying workers. In 2006,
a new labor law was proposed and submitted for public comment.
Enacted in 2008, the Labor Contract Law of the People's Republic of
China permits collective bargaining in a form analogous to that
standard in Western economies, although the only legal unions would
continue to be those affiliated with the All-China Federation of Trade
Unions, the Communist Party’s official union organization. The new law
has support from labor activists, but was opposed by some foreign
corporations, including the American Chamber of Commerce and the
European Chamber of Commerce. There is some expectation that the
law would be enforced. In 2010 a substantial increase in labor related
cases brought to court in 2008 was reported.
The All-China Federation of Trade Unions is the sole national
trade union federation of the People's Republic of China. It is the
largest trade union in the world with 134 million members in 1,713,000
primary trade union organizations.The ACFTU is divided into 31
regional federations and 10 national industrial unions.

JAPAN

Employment Agreements

Under the Civil Code, a contract in which one person performs services
for another with compensation may be construed as any one of the
following:

• an employment agreement where the object is the completion of

labor under the employing party's direction.
• an independent contractor agreement where the object is the
completion of a specific task.
• a mandate agreement where, similar to power of attorney in
common law countries, one party performs designated tasks on
the other party's behalf. These tasks are usually legal acts but
may be non-legal acts, in which case, the agreement is referred
to as a quasi-mandate .Generally speaking, employment
agreements are regulated by the Civil Code and by Labor
Standards Law .

Prohibiting Discrimination

Article 4 of Labor Standards Law prohibits discrimination in

pay based on gender: "An employer shall not engage in discriminatory
treatment of a woman as compared with a man with respect to wages
by reason of the worker being a woman." Subsequent legislation has
also banned forms of disparate treatment which were previously used
to skirt this stipulation. For instance, women must be afforded the
same hiring, job training, promotion opportunities and retirement plans
as men.
 Article 3 of Labor Standards Law prohibits ethnic, national
and religious discrimination by employers in regards to work
conditions: "An employer shall not engage in discriminatory treatment
with respect to wages, working hours or other working conditions by
reason of the nationality, creed or social status of any worker..."

LABOR LAW OF THE UNITED STATES OF AMERICA

The Fair Labor Standards Act of 1938 set the maximum

standard work week to 44 hours, and in 1950 this was reduced to 40
hours. The green cards entitle legal immigrants to work just like US
citizens, without requirement of work permits. Despite the 40-hour
standard maximum work week, some lines of work require more than
40-hours to complete the tasks of the job. For example, if you prepare
agricultural products for market you can work over 72 hours a week, if
you want to, but you cannot be required to. If you harvest products you
must get a period of 24 hours off after working up to 72 hours in a
seven-day period. There are exceptions to the 24 hours break period
for certain harvesting employees, like those involved in harvesting
grapes, tree fruits and cotton. Professionals, clerical (administrative
assistants), technical, and mechanical employees cannot be
terminated for refusing to work more than 72 hours in a work week.
These high hour ceilings, combined with a competitive job market,
often motivate American workers to work more hours than required.
American workers consistently take fewer vacation days than their
European counterparts, and on average take the fewest days off of any
developed country.

The Fifth and Fourteenth Amendments of the United States

Constitution limit the power of the federal and state governments to
discriminate. The private sector is not directly constrained by the
Constitution. The Fifth Amendment has an explicit requirement that
the Federal Government not deprive individuals of "life, liberty, or
property", without due process of the law and an implicit guarantee
that each person receive equal protection of the laws. The Fourteenth
Amendment explicitly prohibits states from violating an individual's
rights of due process and equal protection. Equal protection limits the
State and Federal governments' power to discriminate in their
employment practices by treating employees, former employees, or
job applicants unequally because of membership in a group, like a
race, religion or sex. Due process protection requires that employees
have a fair procedural process before they are terminated if the
termination is related to a "liberty", like the right to free speech, or a
property interest.
 The Age Discrimination in Employment Act of 1967
prohibits employment discrimination based on age with respect to
employees 40 years of age or older. This Act was created to promote
employment of older persons based on their ability rather than age; to
prohibit arbitrary age discrimination in employment; to help employers
and workers find ways of meeting problems arising from the impact of
age on employment because in the face of rising productivity and
affluence, older workers find themselves disadvantaged in their efforts
to retain employment, and especially to regain employment when
displaced from jobs; the setting of arbitrary age limits regardless of
potential for job performance has become a common practice, and
certain otherwise desirable practices may work to the disadvantage of
older persons; the incidence of unemployment, especially long-term
unemployment with resultant deterioration of skill, morale, and
employer acceptability is, relative to the younger ages, high among
older workers; their numbers are great and growing; and their
employment problems grave; and the existence in industries affecting
commerce, of arbitrary discrimination in employment because of age,
burdens commerce and the free flow of goods in commerce.

Title VII of the Civil Rights Act is the principal federal statute
with regard to employment discrimination prohibiting unlawful
employment discrimination by public and private employers, labor
organizations, training programs and employment agencies based on
race or color, religion, sex, and national origin. Retaliation is also
prohibited by Title VII against any person for opposing any practice
forbidden by statute, or for making a charge, testifying, assisting, or
participating in a proceeding under the statute. The Civil Rights Act of
1991 expanded the damages available to Title VII cases and granted
Title VII plaintiffs the right to jury trial.

The National Labor Relations Act, enacted in 1935 as part of

the New Deal legislation, guarantees workers the right to form unions
and engage in collective bargaining. This legislation and its subsequent
amendments are also key elements of U.S. labor law.

CANADIAN LABOUR LAW

Canadian labour law is that body of law which regulates the

rights, restrictions obligations of trade unions, workers and employers
in Canada.

The Employment Standards Act of British Columbia

(Canada), is legislation enacted by the provincial government of British
Columbia to protect the rights of working people. Sections within the
act outline the employers responsibility to their employees, notably
things such as minimum wage, meal breaks, and parental leave. The
act also works to protect residents of the province by preventing
employment discrimination.

British labour law

The Factory Acts (first one in 1802, then 1833) and the 1832
Master and Servant Act were the first laws regulating labour
relations in the United Kingdom. The vast majority of employment law
before 1960 was based upon the Law of Contract. Since then there has
been a significant expansion primarily due to the "equality movement"
and the European Union.There are three sources of Law: Acts of
Parliament called Statutes, Statutory Regulations (made by a
Secretary of State under an Act of Parliament) and Case Law
(developed by various Courts).

The first significant modern day Employment Law Act was the
Equal Pay Act of 1970 although as it was a somewhat radical
concept it did not come into effect until 1972. This act was introduced
as part of a concerted effort to bring about equality for women in the
workplace. Since the election of the Labour Government in 1997, there
have been many changes in UK employment law. These include
enhanced maternity and paternity rights, the introduction of a National
Minimum Wage and the Working Time Directive which covers working
time, rest breaks and the right to paid annual leave. Discrimination law
has also been tightened, with protection from discrimination now
available on the grounds of age, religion or belief and sexual
orientation as well as gender, race and disability.

LABOUR LAW OF THE PHILIPPINES

The Labor Code of the Philippines stands as the law

governing employment practices and labor relations in the Philippines.
It was enacted on Labor day of 1974 by President Ferdinand Marcos, in
the exercise of his then extant legislative powers.

The Labor Code prescribes the rules for hiring and termination of
private employees; the conditions of work including maximum work
hours and overtime; employee benefits such as holiday pay, thirteenth
month pay and retirement pay; and the guidelines in the organization
and membership in labor unions as well as in collective bargaining.
 The Labor Code contains several provisions which are beneficial
to labor. It prohibits termination from employment of Private
employees except for just or authorized causes as prescribed in Article
282 to 284 of the Code. The right to trade union is expressly
recognized, as is the right of a union to insist on a closed shop. Strikes
are also authorized for as long as they comply with the strict
requirements under the Code, and workers who organize or participate
in illegal strikes may be subject to dismissal. Moreover, Philippine
jurisprudence has long applied a rule that any doubts in the
interpretation of law, especially the Labor Code, will be resolved in
favor of labor and against management.