Reward Systems

What is Reward?

          Give something to someone in recognition of their services, effort or achievement.

          There are 2 types of reward program:

          FINANCIAL REWARD: 

• Bonus
• Allowance
• Pension
• wages and salary

          NON-FINANCIAL REWARD:

• Praise for good work
• Letters of appreciation
• Annual dinner with all organization
• Career opportunity

Wages, Payment and Working Hours Systems

WAGES SYSTEMS

Pay increases, bonus and incentive plans

Pay increases

Base pay is a fixed regular payment made to an employee in exchange for performance of the duties and responsibilities of their role. When an employee receives an increase to their base pay, it is considered a pay increase. There are various reasons and methods for determining an increase, but the common factor is that the increase changes the level of ongoing base pay.

A cost of living increase

• This is an increase offered to employees, regardless of performance, with the intention of increasing base pay for each role on the salary scale by a set percentage in order to account for increases in the cost of living. When this is offered regularly, employees can begin to see it as an entitlement.
• If Cost of living increases are provided, they are generally done on an annual basis, and are given to all employees at a rate recommended by the Executive Director and approved by the Board of Directors and is contingent on the overall financial stability of the agency.
• Many small organizations are moving away from the standard cost of living increase and performing market adjustments instead.

A market adjustment following a compensation review against pre-established criteria

• Market adjustments are typically made following the receipt of market survey data. This data is usually received and evaluated towards the end of either your fiscal or calendar year. Organizations will evaluate their salaries against market data and, if required, adjust base salaries for roles that are below the market. Many organizations have predetermined the percent of market they want to be paying at – i.e. a decision to pay at the median, or 50th percentile.
• If a position in the organization is significantly overpaid compared to market or, some companies will notify employees and not provide an increase to the employee. In this situation, the employee is considered to be “red circled” (unable to qualify for any salary increases until their salary comes in line with market)

A promotional increase

• A promotion is the advancement of an employee to a position that is evaluated at a higher grade level than the position to which the employee is currently assigned.
• An employee who is being promoted can receive a promotional increase at the time of the promotion aligned to the appropriate point in the new salary range, taking into consideration performance, qualifications, and market information.
• Promotion is usually based on availability of opportunities and preparedness of employees to advance.

A merit increase

• Merit increases are awarded to recognize an employee’s contribution and to compensate them for their high level of performance.
• Performance is the key factor in awarding a merit increase and can be the factor that moves a person through the salary scale towards the midpoint or higher. Merit increases can be awarded on an employee’s anniversary date following a formal performance review or at the beginning of a calendar year, depending on your compensation structure and philosophy.

Bonus payments

Bonus pay is compensation over and above the amount of pay specified as wages or salary and it is only distributed as the organization is able to pay or as outlined in an employment contract.

Bonus pay is used by many organizations to improve employee morale, motivation, and productivity or as a thank you to employees who achieve a significant goal.

As long as bonus pay is discretionary by the employer, it is not considered to be a contract. If the employer promises a bonus, they may be legally liable to pay it out.

Incentive plans

Incentive plans have not typically been popular in the nonprofit sector. However, leaders are starting to see a change in perspective regarding the use of incentive plans. Providing incentive plans, especially to senior level staff, can enable organizations to compete for talent they would otherwise have not been able to pursue.

• Incentive plans are established to reward employees for improved commitment and performance and as a means of motivation
• An incentive plan is designed to supplement base pay and fringe benefits
• A financial incentive plan may offer a percentage of base salary or a cash bonus whereas a non-financial incentive plans offer benefits such as additional paid vacations or increased professional development

PAYMENT SYSTEMS

WORKING HOURS SYSTEMS

       Working hour is the amount of time that someone spends at     works during a day.

• The normal working hours of countries worldwide are around 40 to 44 hours per week.
• Malaysia runs on a normal eight-hour working day system  with Saturdays and Sunday as a day of rest.
• Private sector hours are generally from 9am to 5pm (Monday-Friday) and 9am to 1pm (Saturday)
• While government office hours are usually from 8.30am to 4.30pm.

Employement Act 1995 Section 60A

An employee shall not be required under his contract to work :

• More than 5 consecutive hours without 30 minutes break.
•  More than 8 hours per day
•  More  than 10 hours per day when spread-over period is involved
• More than 48 hours per week

Compensation and Benefits

Benefits will help to attract staff to join the organization , retain existing employees and increases morale of employees which may lead to higher productivity

Statutory benefits

• Maternity leave
• Sick leave
• Annual leave
• Paid public holidays
• Contribution to Employees Provident Fund

Non-statutory benefits

• Time-off payments
  1. Marriage
  2. Paternity leave
  3. Personal emergencies
  4. Studies
  5. Death of relatives

• Health care
  1. Payment of medical , optical and dental bills .
  2. Hospitalization benefits

• Other benefits
  1. Insurance (other than SOCSO)
  2. Financial services
  3. Discounted good/services
  4. Retirement benefits
  5. Educational assistance

Legislation Relating to Payment of Wages and Working Hours

Summary of Employment Laws in Malaysia

EMPLOYMENT ACT, 1955

The Employment Act, 1955 is the main legislation on labour matters in Malaysia.

The Employment Act provides minimum terms and conditions (mostly of monetary value) to certain category of workers:

1. Any employee as long as his month wages is less than RM2000.00 and
2. Any employee employed in manual work including artisan, apprentice, transport operator, supervisors or overseers of manual workers, persons employed on vessels and even domestic servants are classified as employees even if their wages is more than RM2000.00 per month.

Paid maternity leave	:	60 days
Normal work hours	:	Not exceeding eight hours in one day or 48 hours in one week
Paid holiday	:	At least 11 gazetted public holidays ( inclusive of five compulsory public holidays; National Day, Birthday of the Yang Dipertuan Agong, Birthday of Ruler/Federal Territory Day, Labour Day and Malaysia day) in one calendar year and on any day declared as a public holiday under section 8 of the Holiday Act 1951

Paid annual leave for employees:
Less than two years of service	:	8 days
Two or more but less than five years of service	:	12 days
Over five years of service	:	16 days

*Minimum paid annual leave to be provided for employees

Paid sick leave per calendar year:
Less than two years of service	:	14 days
Two or more but less than five years of service	:	18 days
Over five years of service	:	22 days
Where hospitalisation is necessary	:	Up to 60 days (inclusive of the paid sick leave entitlement stated above)

*Minimum paid sick leave to be provided for employees

Payment for overtime work:
Normal working days	:	One-and-a-half times the hourly rate of pay
Rest days	:	Two times the hourly rate of pay
Public holidays	:	Three times the hourly rate of pay

Source: Ministry of Human Resources – www.mohr.gov.my

Children and Young persons (Employment) Act 1966

• To prevent the exploitation of child labour
• Under 14 years – only light work in family’s business
• 14-16 years – In light work that does not involve the use of machinery
• A maximum of 7 hours per day
• Only able to work between 8am – 6pm

Employment (Restriction) Act 1968

• Non-Malaysian citizens are required to obtain a valid work permit before they can be employed locally.
• Working without a valid work permit is strictly illegally under the Immigration Act 1966.

Minimum Wages Order 2016

• Minimum wage has been implemented in 2013 and has been closely observed thereafter.
• Minimum wages is basic wages, excluding any allowances or other payments.

MINIMUM WAGES RATE (as per Minimum Wages Order 2016)
Regional areas	Monthly	Hourly	Daily
			Number of days worked in a week
			6	5	4
Peninsular Malaysia	RM1,000	RM4.81	RM38.46	RM46.15	RM57.69
Sabah, Sarawak and Labuan	RM920	RM4.42	RM35.38	RM42.46	RM53.08

• The Minimum Wages Policy also applies to employees who are paid on piece-rates, tonnage, trip- or commission-based. Employers are required to supplement the wages of these employees if their income does not meet RM1,000 per month for Peninsular Malaysia and RM920 for Sabah, Sarawak and Labuan.

Source: Ministry of Human Resources Malaysia

Payment System, Working Hours and Benefit and Rewards

• Wages Fund Theory: This theory was developed by Adam Smith(1723-1790). his theory was based on the basic assumption that workers are paid wages out of a pre-determined fund of wealth. This fund, he called, wages fund created as a result of savings. According to Adam Smith, the demand for labour and rate of wages depend on the size of the wages fund. Accordingly, if the wages find is large, wages would be high and vice versa

• The Surplus Value Theory of Wages: This theory was developed by Karl Marx(1849-1883). This theory is based on the basic assumption that like other article, labor is also an article which could be purchase on payment of its price such as wages. This payment, according to Karl Marx, is at subsistence level which is less than in proportion to time labour takes to produce items. the surplus, according to him, goes to owner. Karl Marx is well known for his advocation in the favour of labour.