Compensation Management

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Wage & Hour: California Wage Law Protects Nonresidents on Work Done in State, Ninth Circuit Holds.
Dube, Lawrence E.; Daily Labor Report; no218 p AA1 Nov 12, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Nonresidents of California doing work in the state are entitled to some protections of the California Labor Code. In Sullivan v. Oracle Corp. the Ninth Circuit Appeals Court reversed part of a lower court's ruling by stating the nonresident workers were due overtime compensation by California's rules for work done in the state. Since overtime rules in Colorado were more restrictive and nonexistent in Arizona, those states had no interest in the compensation. The court agreed with the lower court regarding nonresidents' work done outside the state, finding California's Unfair Competition Law Section 17200 does not apply.
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Addressing Foreign Plan Issues Under Section 409A.
Cohen, Sandra W.; Tax Management Compensation Planning Journal; v36 no11 pp 251-257 Nov 7, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Multinational organizations must be aware of Internal Revenue Code Section 409A provisions applying to American citizens working abroad as well as foreign individuals working in the U.S and local workers in a foreign country. Section 409A makes exceptions for short term deferrals and the grandfathered plans. Residents of foreign countries subject to Section 409A may benefit from exemptions for broad-based foreign retirement plans, funded-secured plans, tax treaties, government-mandated social security benefits, previously earned compensation and other causes. Some concerns go beyond these exclusions, such as identifying key employees, handling stock options and considering top-up plans.
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Employment Policies: Employers This Year Are Granting Less Thanksgiving Leave, BNA Survey Finds.
Daily Labor Report; v216 p C1 Nov 7, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In 2008, 73 percent of employers will treat both Thanksgiving and the day after as paid holidays, down from 78 percent in 2007. A BNA survey of nearly 300 employers revealed 98 percent will give holiday pay for Thanksgiving, while a third will require some employees to work that day. Since 2003, this percentage has fluctuated from a high of 37 percent. About 12 percent of workers will receive some type of holiday gift, down from the 2004 high of 23 percent. Differences by industry, employer size and union status show those in manufacturing, production and unionized operations most likely to have paid time off and receive a gift.
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Section 409A and Payments of Deferred Compensation With a Corporate Transaction.
Hogans, Daniel L.; Tax Management Compensation Planning Journal; v36 no11 pp 258-264 Nov 7, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Internal Revenue Code Section 409A complicates providing executive compensation in the context of a corporate transaction. The available transition relief expires at the end of 2008, but there is some opportunity to end deferred compensation arrangements and speed up payment under the terms of a change in control. Severance pay can be excluded from Section 409A under the short term deferral exception and when qualified as involuntary separation pay. Severance pay for involuntary termination must comply with certain dollar and time limits. Some taxable health benefits for the post separation period may also be excluded if paid during the 18 month COBRA period.
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Executive Compensation: Clawback Policies Gaining at Fortune 100, Risk Assessment Policies May Be Next.
Hughes, Mary; BNA's Pension & Benefits Reporter; v35 p 2475 Nov 4, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Equilar Inc. has found that, by late 2007, almost 65 percent of Fortune 100 companies had clawback policies to reclaim executive compensation in the event of financial retirement or misconduct. The clawbacks apply to stock incentives slightly more often than to cash incentives. Ethical lapses prompt 74 percent of company policies, compared with clawback policies tied to financial restatements for 60 percent of companies. The issues are under the glaring spotlight of the Troubled Asset Relief Program (TARP), established by the Emergency Economic Stabilization Act of 2008. TARP's Capital Purchase Program requires participating companies to have a way to recover ill-gotten compensation.
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Executive Compensation: Speakers Urge Caution in Applying Section 409A to Discriminatory Health Plan Payments.
Hughes, Mary; BNA's Pension & Benefits Reporter; v35 p 2476 Nov 4, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : At a meeting of the American Bar Association Joint Committee on Employee Benefits, a Treasury Department representative and two attorneys discussed how executive health benefits can avoid falling under Internal Revenue Section 409A. Plans offering discriminatory benefits for highly compensated employees are vulnerable. Under COBRA, payments can made after the actual claims coverage period, usually 18 months. A special compliance rule allows the plans to be compliant with Section 409A if they meet one of four conditions involving a specific date or fixed schedule for coverage. A simpler approach for executive health benefits is for the sponsor to provide funds rather than pay for benefits.
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Tax Administration: Court Rules College Must Pay FICA Tax on Contributions Under Retirement Plans.
Maresca, Meredith Z.; BNA's Pension & Benefits Reporter; v35 p 2503 Nov 4, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In University of Chicago v. United States, the Seventh Circuit Court of Appeals rejected the university's contention that its contributions to pension plans were exempt from FICA tax. The court concluded the monies were wages. The contributions were included in salary reduction agreements which the plaintiff argued were exempt since they would apply only when an employee voluntarily chooses to divert compensation, but the pension plans were mandatory. The court turned to a 1965 IRS ruling, codified in 1983 as Internal Revenue Code Section 3121, requiring FICA taxes on amounts used to purchase annuity contracts for employees pursuant to an agreement to reduce employee salary. The court upheld the lower court's finding for the defendant as well as IRS penalties and interest.
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Merit-Pay Payoff?
Hansen, Fay; Workforce Management; v87 no18 pp 33-34, 36-39 Nov 3, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A mounting body of evidence is questioning the assumption that merit pay increases lead to high productivity. Stanford University's Jeffrey Pfeffer argues that raises based on perceived merit rarely help the organizations and often backfire if too small. Hewlett-Packard's experience verified the academic research. Only an evidence-based approach can prove value, demonstrating the effect of a performance pay program within, for example, selected sites or divisions. Higher employee pay may correlate with better organizational performance without being a direct cause. Pfeffer finds that group incentives and profit sharing are more effective than plans geared to individual performance.
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Non-Monetary Rewards Gaining Traction.
Hirsch, Laura; Canadian HR Reporter; v21 no19 p 24 Nov 3, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Total rewards includes both monetary compensation and nonmonetary recognition. As for cash compensation, surveys show an average 3.7 percent increase in base salaries with wide geographic and industry variation, while Hewitt finds variable pay programs declining as a percentage of total payroll. Flexible benefits are popular with employees, especially life and disability insurance, educational benefits and subsidies for professional memberships. Nonmonetary rewards are increasingly important in motivating and engaging employees. The most effective for recruitment and retention are opportunities for training and career development, flexible work schedules and personal recognition.
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Showing the Whole Benefits Picture.
Deniso, Joann; Canadian HR Reporter; v21 no19 p 28 Nov 3, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Total rewards statements provide the perfect vehicle to communicate the full value of an employee's compensation and benefits in a personalized way. The comprehensive statements are usually provided monthly and reflect the current status of payroll and benefits accrual and often tools to help with financial planning. They also provide an opportunity for general or customized messages from the employer or HR and insight into personal or team performance. Total rewards statements can reinforce branding, differences from competitors, and employee engagement and loyalty, all promoting retention.
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And Now, a Word About Salary Increases.
Grensing-Pophal, Lin; HR Magazine; v53 no11 pp 93-94, 96, 98 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Salary forecasts predict 2009 raises up to about four percent, similar to 2008, but the rate falls short of inflation which is hovering around five percent. It is important to communicate early with workers about compensation and the organization's financial status using messages tailored to the employee audience. Honest, timely and targeted communication can stem rumors and discourage employees' departure. With retention a top priority, it is a good time to focus on continuing career opportunities, benefits and nonmonetary compensation and recognize top performers.
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Defendant Provided Reasonable Interpretation of Plan Provisions.
Benefits & Compensation Legal & Legislative Reporter; v42 no11 pp 5, 7 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The plaintiff in Dunn v. GE Group Life Insurance Co. et al. worked for the defendant company until becoming disabled by a stroke. The company calculated disability benefits based on basic monthly earnings, failing to consider commissions earned before the event. On the plaintiff's request, the company recalculated for one commission amount but not a second amount, earned but not paid until after the stroke, prompting the suit. The Fifth Circuit Appeals Court reversed the district court's ruling for the plaintiff. The higher court ruled the administrator's decision legally correct with only a minimal conflict of interest by the insurer as administrator. The court deferred to the defendant's decision against recalculating for additional benefits.
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Drafting Key Employee Contracts to Avoid Employment Claims.
Schaecher, Susan M.; Employee Benefit Plan Review; v63 no5 pp 22-25 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Complex employment contracts for highly compensated employees demand attention to innumerable crucial details to avoid misunderstanding and disagreement. A draft contract should reflect all promises made through any form of communication and be shared with the prospect to settle any differences in understanding. The contract should specify job responsibilities, especially if they are unusual, and can determine the basis of performance review or exempt status. Compensation, benefits, incentives and perquisites should be detailed. The contract may address conflicts of interest, noncompete agreements, contract duration, dispute resolution and responses for breaching the agreement.
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Five Common Mistakes in Nonqualified Deferred Compensation Plans.
Silva, Chris; Employee Benefit News; v22 no14 pp 16, 18 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Employers trying to provide executives tax advantages through deferred compensation must avoid common pitfalls such as the most serious one, failing to calculate FICA taxes at the time of deferral or vesting. Employers should review their choices for funding benefits every few years to ensure they still get the tax advantage planned. At least annually, they should clearly communicate compensation details and conditions, being sure the recipient understands. The plan must be properly administered to be sure of compliance, and investment options must be continually monitored and updated.
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Reward Trends in Egypt.
Richardson, Bruce; Monkez, Ahmed; Benefits & Compensation International; v38 no4 pp 19-22 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Egypt's economy is shifting, with decreasing emphasis on oil and gas, mining and tourism and more on information technology, construction and finance. But it faces obstacles with nine percent unemployment, a shortage of qualified workers with technical and managerial skills, limits on foreign workers and high inflation. The country is undergoing rapid reform, diversifying its economy with considerable support from foreign finance. In 2008, payroll costs are rising fast as workers can get significantly higher compensation by changing jobs. The government is raising public sector salaries to cope with inflation but tying them to individual and organizational performance.
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Set 2009 HR Goals Consistent With Slowing Economy.
HRFocus; v85 no11 pp 1, 11, 13-15 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Bureau of National Affairs has released HR Department Benchmarks and Analysis 2008, a report on human resource (HR) benchmarks for late 2007 and how they compare to previous years. According to the report, the median HR staff ratio in 2007 was one HR worker to every hundred employees, down from 1.1 per every hundred employees in 2006. Median HR expenditures rose less than three percent from 2006 to 2007, compared to 4.9 percent from 2005 to 2006. Median HR staff salary growth was lower from 2006 to 2007 than from 2005 to 2006. These and other trends indicate a moderation of activity and growth in HR departments.
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Things Are Looking Up.
Mintz, S. L.; CFO; v24 no10 pp 62-66, 68, 70-71 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Corporate financial officers (CFOs) shoulder much responsibility for the fiscal health of a company, but they are well rewarded for their efforts. Their median total compensation was $2.3 million, according to a Mercer survey, up 5.4 percent in 2007 over 2006. The figure reflects an average 3.1 percent rise in base pay to $516,000 and 11.5 percent rise in short term incentives to $558,000. Company size and industry correlate strongly with pay. CFOs tend to be mobile, but their pay typically rises with each move. The survey found over half of their replacements come from within the company, but those successors averaged 6.2 less in compensation. The survey also looked at pay for chief executive officers, as well as for various other finance positions.
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Top 10 Compensation Concerns in Uncertain Economy: & Real-Life Solutions.
Report on Salary Surveys; no08-11 pp 1, 4-7, 10-12 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In the poor economy, HR professionals focused on compensation are struggling to meet payroll, let alone consider raises. Over 600 HR pros expressed their compensation concerns, topped by far by a shrinking compensation budget for most industries, employer sizes and locations. For the health care, finance and insurance and manufacturing sectors, recruitment and retention are the major compensation problem, as it was for West Coast employers. Keeping up with the market, salary compression and differentiating among high and low performers are also common problems. Companies are having to choose where to put their money, such as toward retention bonuses or internal training and development programs.
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Canadian Economy: Economy Will Force Canadian Employers to Slash Raises, Conference Board Predicts.
Menyasz, Peter; Daily Labor Report; no208 p A3 Oct 28, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to the Conference Board of Canada's annual compensation survey, nonunion Canadian employers are projected to increase wages by only 3.9 percent for 2009, compared to 4.2 percent actual increases in 2007 and 2008. A Conference Board spokesperson said that the increasingly uncertain economic situation may cut those numbers as much as half a percent, since the survey was taken before the intensification of the economic crisis in September 2008. The largest raises are projected in the oil and gas industries, while manufacturing and telecommunications workers can expect the smallest wage increase. Current projections for union employees in 2009 is expected to be 3.2 percent, down from a real wage increase of 3.5 percent for unionized workers in 2008.
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Retiree Benefits: Divided Washington Supreme Court Says Retirees' Health Benefits Are 'Deferred Comp'.
Meyer, Jo-el J.; Daily Labor Report; no202 p A4 Oct 20, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Navlet v. Port of Seattle, the Washington Supreme Court ruled that a group of retirees was entitled to health benefits because they were eligible to receive such benefits when their employer terminated the collective bargaining agreement with their union. The five to four decision found the benefits were a form of deferred compensation that had vested while the agreement was in effect. The majority rejected the plaintiff's contention that the benefits could not have vested because the benefit fund reserved the right to alter the benefits. According to the majority opinion, the right to alter the benefits did not define the employer's underlying obligation to provide benefits. The dissenting opinion argued that health benefits were not deferred compensation and said the result of the decision would be that many employers would cease providing benefits, or at least postretirement benefits, for fear of incurring an obligation to provide them for life.
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Making Global Pay Pay Off.
Barlas, Stephen; Human Resource Executive; v22 no14 pp 52-54 Oct 16, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to Mercer's Global Compensation Strategy and Administration Survey for 2006-2007, 61 percent of respondents already had a global compensation strategy and 25 percent are considering one. A little more than half of U.S. companies reported having a global compensation strategy, compared to almost three quarters of European companies, but a greater percentage of U.S. companies was considering a global strategy. Most companies are not embracing total globalization, with a quarter to a third only planning to globalize some elements of their overall pay strategy. General Motors, which began globalizing all pay grades in 2005, is an example of a large corporation that has implemented a successful global pay strategy.
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RIMS Salary Survey Shows CROs on Top.
Hunt, Kristin Gunderson; Business Insurance; v42 no40 pp 1, 32 Oct 6, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A survey by the Risk & Insurance Management Society (RIMS) shows total compensation for chief risk officers (CROs) and vice presidents of risk management averaged $220,200 in 2008. Comparable Canadian companies gave CROs total compensation of $179,025. Organizations that are larger and in the public sector offer compensation at the high end of the range. Entertainment and media firms pay at the top of the scale, while those in education pay the least. Top level risk management positions are relatively new and rapidly growing in strategic importance within companies.
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Say on Pay: Still Needed?
Dobson, Sarah; Canadian HR Reporter; v21 no16 pp 13, 18 Oct 6, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The demand for a firmer tie between executive performance and compensation is growing louder. In early 2008, 40 percent of shareholders of five Canadian banks voted for a say on pay. In September 2008, the Canadian Securities Administrators put out rules requiring companies to provide comprehensive and easily read details on executive pay, a move that may eclipse the shareholders' movement. It can be argued that shareholders lack information to judge compensation, the compensation committees handle pay rather than boards of directors and shareholders can vote directors out of office. But the shareholders' advisory vote sends a strong message on excessive executive pay.
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Release Us From Confusion Over Nonqualified Deferred Compensation.
Oringer, Andrew L.; Tax Management Compensation Planning Journal; v36 no10 pp 223-236 Oct 3, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The release of claims often tied to severance pay has become mired in the Internal Revenue Code Section 409A provisions about deferred compensation. A severance benefit paid shortly after an employee's termination is simply a short term deferral. But some release requirements, such as timing provisions in the ADEA, can introduce a indefinite deferral of compensation and make the payment subject to Section 409A. Setting a date by which a release must be finalized and payment made can resolve matters. Otherwise, compensation arrangements normally subject to 409A can be structured to be paid in the short term or within a specific period to avoid or minimize liability.
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2 Surveys Forecast 3.7% for 2009, More for High Performance.
Report on Salary Surveys; no08-10 pp 1, 12-14 Oct 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to surveys from Mercer and Business and Legal Reports, salaries are expected to increase by an average of 3.7 percent in 2009. The Mercer report finds that the best performing workers can expect a 5.6 percent salary increase, while average performers will likely receive only 3.3 percent raises. It also found that the oil and gas and business outsourcing industries would have the largest salary increases. The Business and Labor Reports survey examined merit increases rather than overall salary increases and found more companies focusing on merit increases in 2009 than general increases.
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