Compensation and Position Classification System (CPCS) for GOCCs

1. Compensation and Position Classification System (CPCS) for GOCCs Title PRESENTATION FOR GOCCs June 2016

2. Slide Title Discussion Agenda • CPCS Guiding Principles and Rewards Philosophy • Position Classification System • a. Business Unit Size • b. Career Bands, Career Levels and Job Grades • Compensation Items • a. Salary Ranges • b. Fixed Bonuses and Fixed Cash Allowances • c. Performance-Based Bonuses • d. Other Items in and beyond the CPCS • Implementation Guidelines of the CPCS • Communications Planning and Key Messages • Job Titles and Typical Qualification Standards

3. Slide Title CPCS Guiding Principles and Rewards Philosophy

4. Background of the Compensation and Position Classification System (CPCS) for GOCCs Slide Title • GOCC Governance Act of 2011 (Republic Act 10149), the GOVERNANCE COMMISSION FOR GOVERNMENT-OWNED OR -CONTROLLED CORPORATIONS (GCG) was mandated to: • (a) Classify GOCCs; • (b) Develop and recommend a competitive compensation and remuneration system which shall: • attract and retain talent • allow the GOCC to be financially sound and sustainable • (c) Develop a COMPENSATION AND POSITION CLASSIFICATION SYSTEM (CPCS) which shall apply to all officers and employees of GOCCs.

5. Slide Title CPCS Guiding Principles • 1. Provide GOCCs with adequate operational autonomy and flexibility towards ensuring efficient and effective implementation of a total compensation framework to ensure: • (a) The adoption of reasonable, justifiable and appropriate remuneration schemes to prevent or deter the granting of unconscionable and excessive remunerations packages; • (b) Generally be competitive with the private sector doing comparable work, and in compliance with prevailing laws on minimum wage; • (c) Operate within their affordability limits and sustainability capacities, and in accordance with their overall size as provided herein; • (d) Adhere to the principle of equal pay for work of equal value; and • (e) The rewards system supports and encourages performance-driven, productive, and efficient organizations.

6. Slide Title Guiding Principles (cont’d) • 2. The CPCS shall be updated periodically by GCG based on the following: • (a) A review of the GOCC compensation rates; • (b) The performance of the GOCC and its overall contribution to the national economy; • (c) Drastic changes in market or business environment; • 3. TheCPCS shall cover all positions,on full or part time basis

7. Slide Title Excluded Positions Individuals hired by GOCCs without employer-employee relationships and paid from non-Personal Services appropriations/budgets: (a) Members of the Governing Board; (b) Consultants and experts hired to perform specific activities or services with expected outputs; (c) Laborers hired through job contracts (pakyaw) and those paid on piecework basis; (d) Student laborers and apprentices; (e) Individuals or groups of people engaged through job orders, contracts of service, or others similarly situated.

8. Slide Title Covered GOCCs • All GOCCs and their subsidiaries • Charted or non-chartered • Including those previously exempted from the coverage of the Salary Standardization Law (SSL), Republic Act No. 6758. • All GOCCs that are losing and/or highly subsidized in their operations shall maintain their current compensation framework. Such GOCCs may apply with GCG to implement the CPCS, if it can be determined that their operations improve and the GOCC shall remain financially viable

9. Slide Title Excluded GOCCs • GOCCs expressly outside the coverage of R.A. No. 10149 • BangkoSentral ng Pilipinas • State Universities and Colleges (SUCs) • Cooperatives • Local Water Districts (LWDs) • Economic Zone Authorities • Research Institutions

10. Slide Title Position Classification System

11. Classifications of GOCCs (Under R.A. No. 10149 and E.O. No. 203) Slide Title • To ensure that GOCCs are aligned with rates and practices of private sector entities doing comparable work • By Sector • Government Financial Institutions (GFIs) and Gaming • All Other Sectors • Energy and Materials • Utilities and Communications • Area Development, Trade and Tourism • Agriculture, Fisheries and Food • Educational and Cultural • By Overall Size - each GOCC shall be compared or benchmarked with private sector entities similar in size in terms of finances and operations

12. Position Classification Process Slide Title Determine the Size of the Organization (to be done by GCG based on data submitted by GOCCs) Grade of the organization based on: • Company financials • Number of full time equivalent (FTE) employees • Geographical scope and Business Complexity/Diversity Determining the Band of the Job • Nature of contribution • Level of Contribution Determining the Career Level and Job Grade The size of the organization determines the number of Job Grades a GOCC may have. It also impacts the Job Grades of Jobs in the Executive Band of the CPCS.

13. Step 1: Determining Size of the Organization Slide Title CLASSIFICATION OF GOCCS BY OVERALL SIZE. – For purposes of the CPCS, GOCCs are classified in accordance with their overall size determined by getting the average of the following three (3) factors: (a) Company Financials; (b) Number of Full-Time Equivalent (FTE) Employees; and (c) Geographical Scope and Business Complexity. If the resulting average grade is a decimal number, the figure shall be rounded off to the nearest whole number for the GOCC’s overall grade / size as categorized below: The classification shall be based on an official certification issued by GCG, covered by supporting instruments and documents. GCG may change a GOCC’s classification

14. Step 1: Determining Size of the Organization Slide Title 2. Number of FTE Employees. – GOCCs shall have a grade based on the number of FTE Employees as follows: 1. Company Financials shall be based on the average of the prior three (3) years’ audited financial statements; *The computation of Company Financials will be done by GCG in consideration of the operations and mandates of each GOCC. * Consider the approved headcount in the plantilla of the approved organizational structure

15. Step 1: Determining Size of the Organization Slide Title 3. Geographical Scope and Business Complexity. – The grade for the GOCC’s Geographical Scope and Business Complexity shall be determined as 3.1 Geographical Scope Geographical Scope. – (a) Domestic if majority of operations are based in a single country or a small cluster of countries within one region (b) International if the organization is characterized by multi-function operations across an entire region or in several countries in two continents. (c) Global if the majority of functions are represented across three or more continents. All GOCCs are automatically classified as domestic unless there is clear and substantial basis to classify the GOCC’s actual operations otherwise.

16. Step 1: Determining Size of the Organization Slide Title 3. Geographical Scope and Business Complexity. – The grade for the GOCC’s Geographical Scope and Business Complexity shall be determined as: 3.2. Business Complexity – assumes that the GOCC Governing Board has end to end control of the business • The three types of activities considered: • i. Regulatory; and/or • ii. Revenue-Generation; and/or • iii. Social Services

17. Step 2: Determine the Career Band of the Job Slide Title The CPCS Position Classification differentiates jobs on both their nature and level of contribution to the organization CPCS POSITION CLASSIFICATION MAP MANAGEMENT TRACK INDIVIDUAL CONTRIBUTOR TRACK

18. Step 2: Determine the Career Band of the Job Slide Title

19. Step 2: Determine the Career Band of the Job Slide Title

20. Step 2: Determine the Career Band of the Job Slide Title

21. Step 3: Determining the Career Levels and Job Grade Slide Title CPCS POSITION CLASSIFICATION MAP MANAGEMENT TRACK INDIVIDUAL CONTRIBUTOR TRACK

22. Slide Title Sample Output of Job Leveling The Position Classification Matrix allows for easier review of the alignment of jobs vertically in the same function/unit, and across units/functions.

23. Slide Title Compensation Items

24. Slide Title Compensation System in the CPCS • The total compensation granted shall include: • Basic Salaries • Standard Allowances and Benefits • Specific-Purpose Allowances and Benefits • Variable Pay • Excluded are indirect compensation regulated under existing laws • Life and retirement insurance benefits • Employee compensation insurance • Health insurance • Pag-IBIG fund benefits • Provident Fund benefits • There will be non-diminution of the authorized amount of monthly basic salary as of December 31, 2015 for incumbent employees

25. Basic Monthly Salaries: Developing the Salary Ranges Slide Title Conducted cash competitive Analysis Classified the GOCC jobs Using CPCS Developed salary ranges Defined the guiding principles of the CPCS

26. Basic Monthly Salaries: Difference between SSL and CPCS Slide Title FROM TO CPCS Salary Ranges • Job Grades 1 to 11: Single Salary Ranges • Job Grades 12 and above: Salary Ranges differentiated according to Sector a. Government Financial Institutions (GFIs) and Gaming b. All Other Sectors • SSL-covered GOCCs • SSL-exempt GOCCs • SSL: 33 salary grades, 8 steps per grade • CPCS pay structure identifies a Minimum and Maximum pay for each job grade

27. Salary RangesJob Grades 1-11 Slide Title Current SSL Fourth Tranche Monthly Salary Schedule CPCS Salary Ranges • Reference date of Salary Ranges is as of January 1, 2016. • Salary Ranges are typically reviewed every 2-3 years. GCG shall periodically update the CPCS based on parameters outlined in the EO.

28. Salary RangesJob Grades 12 and above Slide Title CPCS Salary Ranges Current SSL Fourth Tranche Monthly Salary Schedule

29. Standard Allowances and Benefits (Fixed Bonuses and Allowances) Slide Title • These items are given across-the-board based on the prescribed rates in line with the private sector practice • Shall include the following:

30. Design Principles of Variable Pay: Performance-Based Bonus Systems Slide Title • Parameters and considerations in designing the PBB • Individual Performance-Based Bonus (IPBB) • Linked to individual performance • Target amount differs depending on Job Grade • Organizational Performance-Based Bonus (OPBB) • Linked to organizational performance • Target amount is 1.0 monthly basic salary for all

31. Elements of the Individual Performance-Based Bonus (IPBB)* Slide Title *The IPBB is separate from the Organizational Performance-Based Bonus (OPBB) **GCG shall issue Memorandum Circulars on the implementation of the various PBB systems.

32. Elements of the Individual Performance-Based Bonus (IPBB)* (cont’d) Slide Title

33. Individual Performance-Based Bonus (IPBB): Illustration Slide Title • Step 1: Evaluate GOCC performance GOCC hits target? Yes No No Pay-Out X Rank employees  • Step 2: Rank eligible employees according to performance

34. Elements of the Organizational Performance-Based Bonus (OPBB)* Slide Title *The OPBB is separate from the Individual Performance-Based Bonus (IPBB) **GCG shall issue Memorandum Circulars on the implementation of the various PBB systems.

35. Slide Title Other Compensation Items in the CPCS • Standard Benefit – Healthcare Plan • The Governing Board of a GOCC may, subject to guidelines to be issued by GCG, procure a Healthcare Plan supplementing benefits received under PhilHealth • The plan may include the following Benefits: • Hospitalization Benefit • Clinical/Outpatient Benefit • Dental Care • Optical Benefit • And others. • GOCC must be financially capable of sustaining services of the Healthcare Plan • Procurement is subject to RA 9184 (Government Procurement Reform Act)

36. Slide Title Other Compensation Items in the CPCS • Specific-Purpose Allowances and Benefits • Hazard Pay for personnel exposed to hazardous situations • Overtime pay for Technical Support, General Staff and Labor Bands • Night-Shift Differential Pay • Honorarium for individuals concurrently occupying a Board/Corporate Officer position • Allowance for lawyer-personnel appearing in court hearings • Other allowances and Benefits peculiar to certain GOCCs (subject to GCG’s approval) • Variable Pay • Anniversary Bonus • Productivity Enhancement Incentive (PEI)

37. Slide Title Other Compensation Items in the CPCS • CNA Incentives, to be extended to cover non-Chartered GOCCs in addition to Chartered GOCCs (governed by policies of DBM) • Incentives allowed by CSC (e.g. Program on Awards and Incentives for Service Excellence) • The GCG may recommend, for the President’s approval, incentives outside of the CPCS for certain position titles in consideration of the good performance of the GOCC. • Early Retirement Incentive Plan (ERIP) for officers and employees covered by CPCS who voluntarily elect to be retired or separated. GOCCs must undergo reorganization under GCG in order to offer this, but do not need to have implemented CPCS.

38. Slide Title Implementation of the CPCS

39. Slide Title Role of the GOCC • Each covered GOCC shall adopt a Total Compensation Framework (TCF), subject to the approval of the President of the Philippines in accordance with the favorable recommendation of the GCG. • If no action is taken by the Office of the President within 45 days of receipt, the same shall be deemed approved unless the Office of the President informs the GCG otherwise. • Implementation of compensation adjustments shall depend on the financial capability of the GOCC and their Corporate Operating Budget as approved by GCG, and those approved by the DBM for entities receiving allocations for the National Government • Basic Salaries – if there are affordability concerns, the GOCC may propose a salary range for each Job Grade that falls below the salary ranges prescribed in the EO, taking into account the financial standing of the GOCC as well as the sustainability of the compensation framework.

40. Slide Title Implementing the Salary Ranges • The implementation of the CPCS is progressive, not retroactive • Hiring Rate guidelines • For JG 1-11 • May be set up to minimum during the probationary period, but in no case lower than the applicable minimum wage rate mandated by law. • Upon appointment to regular status, pay may be increased to the minimum • For individuals who exceed the minimum CSC Qualification Standards, the hiring rate may be set until 5% above the minimum of the salary range • For JG 12 and above • The hiring rate may be set up to 10% above minimum if the individual exceeds the minimum CSC Qualification Standards (e.g. graduation from a reputable school, relevant experience, having more than the required educational attainment)

41. Slide Title Implementing the Salary Ranges • Promotion – the Governing Board through Management may promote individuals through: • Raise the salary to the minimum of the Job Grade of the vacant plantilla item which the employee will be promoted to Example: • Current Job: Grade 4, with Salary of Php 14,000 • Promotion to Job Grade 5, with a minimum of Php 14,788 • Raise raise pay to Php 14,788

42. Slide Title Implementing the Salary Ranges • Promotion (continued) • If the employee’s salary already exceeds the minimum of the Job Grade of said plantilla item, raise the salary by the percentage difference in the salary range minimum of the current Job Grade to the new Job Grade Example: • Current Job Grade 4, with Salary of Php 14,800 • Promoted to Job Grade 5, with a minimum of Php 14,788 • Compute for the percentage difference of the minimums • (Job Grade 5 – Job Grade 4)/Job Grade 4 = (14,788 – 13,214)/13,214 • 11.91% • Raise salary by 11.91% = 14,800 * (1 + 11.91%) = 16,563. • Promotion increases cannot exceed the maximum of the new Job Grade; hence the new salary is capped at 16,547

43. Slide Title Implementing the Salary Ranges • Promotion (continued) • Raise the salary by the percentage difference in the salary range midpoints of the current Job Grade to the new Job Grade Example: • Current Job Grade 4, with Salary of Php 14,800 • Compute for Midpoint = (Minimum + Maximum)/2 • Job Grade 4 = (13,214 + 14,787)/2 = 14,001 • Job Grade 5 = (14,788 + 16,547)/2 = 15,668 • Compute for percentage difference = (15,658-14,001)/14,001 = 11.91% • Compute for the new salary = (14,800 * (1+11.91%) = 16,562 • Promotion increases cannot exceed the maximum of the new Job Grade; hence the new salary is capped at 16,547 • If the employee moves from an overtime-earning job to a non-overtime earning job, consider the earning potential lost

44. Slide Title Implementing the Salary Ranges • Merit Increases – in order to support a performance-driven organization, GOCCs may recommend merit increases subject to GCG’s approval: • Step 1: Determine the salary increase budget for the year. Consider projected market salary increase and the GOCC’s affordability to pay • Step 2: Determine the performance rating distribution under the GOCC’s Strategic Performance Management System (SPMS) or equivalent. Implementing guidelines may vary year-on-year depending on considerations such as budget. The table below shows the recommended distribution of the GOCC’s population:

45. Slide Title Implementing the Salary Ranges • Merit Increases (continued) • Step 3: Allocate percentage increases depending on individual performance. The following additional factors may be considered • Current position in the salary range • Rate of progress and future potential (increase the time interval and/or decrease size of increase for individuals approaching what appears to be the ultimate potential) • Foreseeable promotion opportunities • Salary increase budget • The Governing Board through Management may withhold unearned increases from a poor performer where appropriate • In no case shall implementation of a merit increase result in raising the current salary of an individual above 25% of the maximum for his/her job

46. ILLUSTRATION: Implementing the Salary Ranges Slide Title • Sample Merit Increase matrix considering both position in range and individual performance Using the two-dimensional matrix is aligned to the pay philosophy of considering both individual performance and competitiveness against the market.

47. Slide Title Communications Planning and Key Messages

48. Slide Title Communication Management Objectives General Objective: • To identify the appropriate messages for respective audiences to be delivered through effective communication channels • To equip the communication core team on change and communication management for the CPCS Specific Objectives: • To identify and understand the key stakeholders and their current perceptions about the change • To identify key messages and communication channels to implement the CPCS • To create communication toolkits to provide select communication and change champions to deliver the messages

49. Slide Title Role of Communication Core Team • Advocate of change. Assist in explaining and providing context on CPCS • Link. Bridge the gap between the employees and management and/or GOCCs and GCG • Listen to what employees say about CPCS • Observe how employees react, feel about the changes • Act • Document feedback received • Provide feedback to Core Team and/or GCG on the concerns received and observations noted • Address questions or misperceptions • Direct questions or misperceptions to the right party • Participate in communication management meetings and brainstorm on interventions • Support GCG in addressing or articulating the responses to issues / questions raised

50. An effective Communication Strategy supports the Change Initiative Slide Title Targeted, measurable objectives and the specific strategies needed to achieve success Objectives Who needs to know when and, for key communicators, what their role is in the process Audience Analysis Critical messages that become the touchstone for the entire communication process Key Messages Channels Plan Using the right channel for specific communication interventions Timing Delivering messages in a timely, thoughtful and integrated way Success Measures Guidelines for success and methods of data-gathering