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
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