Compensation and Benefit Design: Applying Finance and Accounting Principles to Global Human Resource Management Systems

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Overview

The definitive HR professional’s guide to designing highly effective compensation and benefit programs

• Best-fit practices and financial/accounting techniques for aligning compensation and benefits with corporate objectives

• How to quantify and optimize the business value of compensation and benefits programs

• Key concepts explained with various examples

This guide will help HR professionals bring true financial and accounting discipline to compensation and benefit design, ...

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Compensation and Benefit Design: Applying Finance and Accounting Principles to Global Human Resource Management Systems

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Overview

The definitive HR professional’s guide to designing highly effective compensation and benefit programs

• Best-fit practices and financial/accounting techniques for aligning compensation and benefits with corporate objectives

• How to quantify and optimize the business value of compensation and benefits programs

• Key concepts explained with various examples

This guide will help HR professionals bring true financial and accounting discipline to compensation and benefit design, tightly align talent management to strategy, and quantify program performance in the language of finance.

Leading educator and consultant Bashker D. Biswas brings together information that is rarely presented coherently, and almost never presented in non-financial texts. He thoroughly explains best-fit practices for superior program design, demystifies relevant financial and accounting concepts, and illuminates key connections between HR program development and GAAP/IFRS accounting requirements.

This guide’s far-reaching coverage ranges from integrating compensation and benefits into Balanced Scorecards to managing expatriate compensation. Biswas reveals the true financial implications of every element of modern compensation and benefit programs, from base salaries to stock incentives, from sales compensation to healthcare cost containment. Perhaps most important of all, he helps you systematically measure the value of your investments—so you can both prove and improve your performance.

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Product Details

  • ISBN-13: 9780133064780
  • Publisher: FT Press
  • Publication date: 12/25/2012
  • Edition description: New Edition
  • Edition number: 1
  • Pages: 368
  • Product dimensions: 6.20 (w) x 9.10 (h) x 1.20 (d)

Meet the Author

Bashker “Bob” Biswas, Ph.D., is the Principal of the Biswas Group Inc., a Global Management Consultancy. Dr. Biswas concurrently holds the position of Visiting Professor at Keller School of Management at DeVry University in Sacramento, California.

Dr. Biswas has over 40 years experience in Total Rewards Management; Finance; Accounting; Executive Compensation; Base, Incentive, Sales and Equity Compensation; Human Resource Strategy; Human Resource Information Systems; International Human Resources; and International Compensation.

The companies he has worked for are Control Data, Bechtel, Memorex, Maxtor, Hitachi Data Systems and BioGenex, and Zain. Dr. Biswas has held positions at the Director level and above since 1982. At Maxtor and BioGenex he was a Vice President. While at Memorex and Zain, he worked out of London and the Middle East/Africa respectively. He has traveled to over 30 countries on variouscompensation and benefits related projects.

During his tenure in the Middle East, Dr. Biswas conducted Total Rewards and Global Human Resource Management Seminars throughout the Middle East and Africa. He was a leading instructor in the Zain Human Resource Management Academy.

In addition, he has held consulting positions at Skopos Corporation, a venture investment backed HRIS start-up cofounded by Dr. Biswas in 1983, at Coopers & Lybrand, and at PricewaterhouseCoopers. At Coopers & Lybrand, he was a Director of Human Resource Consulting in the San Francisco office and National High-tech Leader for Human Resource Consulting. Dr. Biswas was also responsible for the firm’s National Software Industry Compensation Survey. In total he has provided Compensation Consulting to over 40 companies.

Dr. Biswas has taught at various universities as an adjunct faculty member since 1984. He has authored and coauthored articles in Human Resource Management. Dr. Biswas also has presented at WorldatWork’s National Conference and briefly taught in their Certification Program.

Dr. Biswas holds a B.A., M.B.A., and Ph.D., and a post-graduate diploma in Industrial Relations.

He has been a member of WorldatWork (American Compensation Association) since 1972.

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Table of Contents

Part 1

Chapter 1 Introduction: Setting the Stage 3

The Cost Versus Expense Conundrum 4

CAPEX Versus OPEX 7

The Current HR Cost-Classification Structure 8

The Current Accounting for Compensation and Benefit Cost Elements 12

Key Concepts in This Chapter 23

Appendix: The Terms 24

Chapter 2 Business, Financial, and Human Resource Planning 29

The Overall Planning Framework 30

HR Planning 34

HR Programs 43

Key Concepts in This Chapter 52

Appendix 53

Chapter 3 Projecting Base Compensation Costs 55

Base Salary Costs 58

Key Concepts in This Chapter 67

Appendix: Cash Flow Impact of Salary Increases 67

Chapter 4 Incentive Compensation 71

An Introduction to Incentive Compensation Programs 71

Accounting for Annual Cash Incentive Plans 74

Key Incentive Compensation Metrics 77

Free Cash Flow as, an Incentive Plan Metric 81

Economic Value Added as an Incentive Plan Metric 82

Residual Income as an Incentive Compensation Plan Metric 86

The Balanced Scorecard and Incentive Compensation 87

Balanced Scorecard and Compensation 92

Key Concepts in This Chapter 94

Chapter 5 Share-Based Compensation Plans 95

Stock Award Plans 97

Stock Option Plans 100

Stock Option Expensing 103

The Accounting for Stock Options 106

Tax Implications of Stock Plans 112

International Tax Implications of Share-Based Employee Compensation Plans 116

Employee Share Purchase Plans 121

Stock Appreciation Rights 122

Key Concepts in This Chapter 126

Appendix: Stock Options and Earnings per Share 127

Chapter 6 International and Expatriate Compensation 131

The Background to International and Expatriate Compensation 132

The Balance Sheet System 136

Expatriate Taxes 143

The Cost-Differential Allowance 151

Global Payroll Systems 156

International Pensions 159

Global Stock Option Plans 161

Key Concepts in This Chapter 164

Chapter 7 Sales Compensation Accounting 165

General Accounting Practices 166

Sales Compensation Plans 168

Accounting Control and Audit Issues 175

Other Salient Elements of a Sales Compensation Plan 177

Travel Allowances 179

Commission Accounting 183

Key Concepts in This Chapter 185

Chapter 8 Employee Benefit Accounting 187

The Standards Framework 189

Defined Contribution Versus Defined Benefit Plans 190

Section 965 Explained 191

Calculating Plan Benefit Obligations 194

Claims Incurred but Not Reported (IBNR) 194

Other Benefit Obligations 196

Additional Obligations for Postretirement Health Plans 197

Self-Funding of Health Benefits 198

International Financial Reporting Standards and Employee Health and Welfare Plans 201

The Financial Reporting of Employee Benefit Plans 202

Key Concepts in This Chapter 207

Chapter 9 Healthcare Benefits Cost Management 209

The Background 209

The Reasons for the Rising Costs 212

Cost Containment Alternatives 214

Forecasting Healthcare Benefit Costs 228

Key Concepts in This Chapter 230

Chapter 10 The Accounting and Financing of Retirement Plans 231

The Background 232

The Accounting of the Plans 235

The Pension Benefit Obligation 245

Pension Plan Assets 253

The Pension Expense 256

The Accounting Record-Keeping 262

Accounting Standards Affecting Pension Plans 265

Key Concepts in This Chapter 266

Part 2

Chapter 11 Human Resource Analytics 271

The Background for the Use of HR Analytics 272

The Need for HR Analytics 273

Measuring the Effectiveness of HR Investments 274

Total Compensation Effectiveness Metrics 280

A Changed Paradigm 284

Key Concepts in This Chapter 285

Chapter 12 Human Resource Accounting 287

The Background 287

The Debate 289

HR Accounting Methods 291

Key Concepts in This Chapter 300

Appendix: No Long-Term Savings from Workforce Reductions 301

Conclusion 305

An HR Finance and Accounting Audit 306

References 309

Index 323

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