Total Compensation System (Flexible Wage System and its components …
Total Compensation System
Refers to a system that determines and manages the forms of financial and non-financial returns, tangible services and benefits to be given to individual employees in exchange for their contribution to the organisation
purpose and objectives
to set clear and understandable guidelines for how much, to whom and for what to pay, so that employees are motivated to improve their performance, achieve the set targets and at the same time receive fair compensation, corresponding to the labour market and organization capabilities.
-Ensure fair compensation applied to all levels of organisation
-Attract, retain and motivate employees
-Optimal allocation of limited budget
-Identify and reward good performers
-Ensures compliance with legal requirements
-Facilitate understanding of compensation packages
-Review and ensure compensation packages are competitive with market
Roles and responsibilities
Promote, support, and administer the compensation program and processes
Provides tools and resources to managers to help them make appropriate pay decision
Review compensation decisions to ensure fairness and equity
Ensure compliance with laws and regulations
Assess employee performance
Clarify employees’ doubts
Recommend compensation actions (ie promotions, bonus, pay increment)
Update and maintain accurate job information
Develop and recognise staff for compensation appropriately
Components of total compensation system
Direct financial compensation
Refers to monetary remuneration paid directly to employees in the form of wages, salaries etc for work done and performance results achieved
Individual, Group-based, company wide incentives
Indirect Financial compensation
Refers to non-monetary remuneration provided to employees, including annual leave, overtime allowance, health insurance, life assurance, company car and mobile and pension funds. Note that both mandatory benefits (annual leave) as well as voluntary benefits (healthcare) can be included in indirect compensation.
Hospitalisation and medical leave
Maternity and Childcare Leave
Payment for time not worked
Flexible Benefits Scheme
consists of the satisfaction that a person receives from the job itself or from the psychological/physical environment in which the employee works.
The Job Content
The job Environment
Flexible Wage System and its components
A flexible wage is one that has a sizeable variable component that allows companies to adjust wage costs quickly in severe business downturns
Annual Wage Supplement (AWS)
Also called the “13th month payment”. It is a single annual payment on top of an employee’s total annual wage. AWS is not compulsory.
A bonus is a one-time payment to reward employees for their contributions to the company. It is usually offered at the end of the year.
Bonus payments are not compulsory, unless specified in the employment contract or collective agreement.
Monthly Variable Component (MVC)
Monthly Variable Component ((MVC) forms part of monthly basic salary. It is to be included in computing overtime payment and CPF contribution.
Tripartite partners recommend that MVC should form 10% of monthly basic salary
Recommended Wage Structure
Monthly Basic Salary (80%) + Bonus (20%)
Month Basic salary (80%) consists of:
Monthly Fixed Component (70%)
Monthly variable component (10%)
Bonus (20%) includes:
AWS & Variable Bonus
internal and external factors that influence total compensation system
Ability to Pay
Job Evaluation and Performance Appraisal
Cost of Living