Index
13th and 14th month pay, 22-23
401(k) plans, loans from, 238-239. See also defined contribution pension plans
A
AAI (average annualized increase), 61
ABO (accumulated benefit obligation), 245
absorption costing for sales compensation plans, 166-167
accounting control in sales compensation plans, 175-177
accounting cycles, defined, 16
accounting standards
for defined benefit pension plans, 265-266
FASB ASC 900s standards, 188
GAAP (General Accepted Accounting Principles), 8
for employee benefits, 188-190
IFRS (International Financial Reporting Standards) versus, 119-121
IFAS (International Financial Accounting Standards), 8
for retirement benefits, 265-266
accounting systems. See also HR accounting
claims incurred but not reported (IBNR), 194-196
commission accounting software, 183-184
compensation and benefits cost flows in, 12-14
for defined benefit plans, 239-244
for defined contribution plans, 236-238
incentive compensation in, 74-77
payroll systems
13th and 14th month pay, 22-23
salaried employees in, 22
transaction tracking in, 16-21
restricted stock awards in, 98-100
sales compensation plans in, 166-168, 172-175
SARs (stock appreciation rights) in, 123-125
stock option plans in, 101-112
contingencies in stock plans, 111-112
expiration of options, 109, 111
fair value versus intrinsic value expensing, 101-103
accumulated benefit obligation (ABO), 245
accumulated depreciation, 5
acquisition cost model (HR accounting), 292-294
activity-based costing for sales compensation plans, 168
actual expense method (automobile allowances), 180
actuarial assumptions, changing, 251-252
adders
accounting classifications, 14
defined, 11
additional paid-in capital pool (APIC pool), 114
administrative expenses, FASB ASC 965 standard, 196
age factor, 241
AICPA (American Institute of Certified Public Accountants), 188
allowances
accounting classifications, 14
cost-differential allowance, 151-156
defined, 11
in expatriate compensation, 138-140
American Institute of Certified Public Accountants (AICPA), 188
amortization
of prior service cost, 259
of stock option expenses, 106
annual benefit pension formula, 240-241
annual cash incentive plans. See incentive compensation
annual financial budgets, 33
annual lease value, 182
APIC pool (additional paid-in capital pool), 114
assets
HR outlays as, 14
physical versus human assets, 289-291
Audit and Accounting Guide: Audits of Employee Benefit Plans, 188
audits in sales compensation “plans, 175-177
automobile allowances reimbursement plans, 179-181
average annualized increase (AAI), 61
average merit increase, 283
average performance rating, 283
B
defined, 134
balanced scorecard as incentive compensation metric, 87-94
Balsley, Heather, 85
base, commission, and bonus compensation plans, 168-171
sales targets, 169
sales volume as commission trigger, 170-171
base pay. See base salary
accounting classifications, 14
basic pay versus, 9
elements of, 57
basic pay, base pay versus, 9. See also base salary
Becton, J. Bret, 73
beginning month payroll (BMP), 60
benchmarking HR effectiveness metrics, 274-277
benefit obligations
calculating, 194
for postretirement health plans, 197
types of, 196
benefit payments, FASB ASC 965 standard, 191
benefits. See employee benefits
Black-Scholes option pricing, 104
BMP (beginning month payroll), 60
bonus plans. See cash incentive plans; sales bonus plans
book value of assets, market value versus, 7
booking quota, 173
business plans, 33
C
cafeteria system, defined, 135
calculating
benefit obligations, 194
commission factor, 172
cost-differential allowance, 152-154
EVA (Economic Value Added), 82-86
gross profit, 13
incentive compensation based on balanced scorecard, 92-94
PBO (projected benefit obligation), 247-252
present value of future earnings, 296-297
CalSTRS (California State Teachers’ Retirement System), 241
CAPEX (capital expenditures), 4
OPEX (operating expenditures) versus, 7-8
capitalization of historical costs model. See acquisition cost model (HR accounting)
capitalizing human resource assets. See HR accounting
categories of, 72
circular effective, 77
claims incurred but not reported (IBNR), FASB ASC 965 standard, 194-196
COBRA (Consolidated Omnibus Budget Recovery Act), 211
COLA (cost-of-living allowance), cost-differential allowance versus, 151
commission accounting software, 183-184
commission expenses, reporting, 167
commission factor in quota-based plans, 172
commission payments. See also sales compensation plans
accounting control and audit issues, 175-177
defined, 169
sales volume as trigger for, 170-171
commuting rule, 182
company vehicle usage, 181-183
compa-ratio, 283
competitiveness of, 284
cost flows in accounting systems, 12-14
effectiveness metrics, 280-284
payroll systems
13th and 14th month pay, 22-23
salaried employees in, 22
transaction tracking in, 16-21
relationship with HR planning, 43-52
executive incentive plans, 50-51
job analysis and classification activities, 47-48
organization design and planning activities, 48-49
program administration activities, 49
program development activities, 44-47
total compensation activities, 51-52
total costs, forecasting, 55-58
compensation to revenue factor, 281
compensation to total expense factor, 281
competencies, defined, 39, 295
competitiveness of compensation and benefits, 284
competitor salary comparisons, 58
concurrent reviews, 223
Consolidated Omnibus Budget Recovery Act (COBRA), 211
consumer-driven healthcare, 214-222
FSAs (flexible spending accounts), 220-222
HRAs (health reimbursement arrangements), 218-220
HSAs (health savings accounts), 215-218
contingencies in stock plans, accounting for, 111-112
contracts
with insurance companies, value of, 204
in sales compensation plans, 176-177
contribution approach for sales compensation plans, 167
corporate wellness programs, 225-227
cost accounting, sales compensation plans in, 166
cost containment alternatives for healthcare costs, 214-228
consumer-driven healthcare, 214-222
corporate wellness programs, 225-227
discount drug programs, 227
self-funding of health benefits, 228
spousal coverage, 227
cost flows
for compensation and benefits, in accounting systems, 12-14
cost of capital as incentive compensation metric, 81
cost-based models (HR accounting), 292-296
acquisition cost model, 292-294
opportunity cost model, 295-296
replacement cost model, 294-295
cost-differential allowance, 139
cost-of-living allowance (COLA), cost-differential allowance versus, 151
costs
forecasting
total compensation costs, 55-58
cost containment alternatives, 214-228
reasons for increases in, 209-214
cross-selling, 169
Crystal, Graef, 282
currency fluctuations
cost-differential allowance and, 154-156
in expatriate compensation, 143
Czismar, Chuck, 9
D
death benefits, 197
deferred tax asset (DTA), 113, 119-120
defined benefit health and welfare plans, defined contribution plans versus, 190-191
defined benefit pension plans, 235
accounting standards for, 265-266
accounting systems for, 239-244
defined contribution health and welfare plans, defined benefit plans versus, 190-191
defined contribution pension plans, 235
accounting systems for, 236-238
reporting requirements, 265
demand versus supply in HR analytics, 284-285
dependent care FSAs, 221
depreciation, 5
development rate, 280
direct labor, defined, 13
discount drug programs, 227
discounted free cash flow, 80, 278
displacement allowance, 138
DOL Form 5500, 203
draws, 174
DTA (deferred tax asset), 113, 119-120
E
EBIT (earnings before interest and taxes), 278
Economic Value Added (EVA), 80
as incentive compensation metric, 82-86
RI (residual income) versus, 86
economic value models. See value-based models (HR accounting)
education allowance, 139
effectiveness metrics
human capital effectiveness metrics, 277-279
internal HR operational metrics, 280
total compensation and benefits effectiveness, 280-284
employee benefits. See also health and welfare plans; retirement benefits
accounting classifications, 14
accounting standards for, 188-190
claims incurred but not reported (IBNR), 194-196
defined contribution versus defined benefit plans, 190-191
elements of, 57
FASB ASC 965 standard, 191-197
financial reporting requirements, 202-207
healthcare costs
cost containment alternatives, 214-228
reasons for increases in, 209-214
IFRS (International Financial Reporting Standards), 201-202
self-funding of health benefits, 198-201
employee learning costs, 293
Employee Retirement Income Security Act (ERISA), self-funding of health benefits and, 198-201
employee share purchase plans (ESPPs), 121-122
employee turnover, effect on base salary costs, 59
employees per HR staff, 275
employer contributions, FASB ASC 965 standard, 192-193
employer payments in payroll systems, 20
equalization payments, 139
equity compensation, 11. See also share-based compensation
ERISA (Employee Retirement Income Security Act), self-funding of health benefits and, 198-201
ESPPs (employee share purchase plans), 121-122
estimating incentive payouts, 76
EVA (Economic Value Added), 80
as incentive compensation metric, 82-86
RI (residual income) versus, 86
evaluation in HR planning, 43
exceptions to sales commissions, 175
exclusions from income for expatriate taxes, 149-150
executive compensation, 282
executive incentive plans, relationship with HR planning, 50-51
exercising options, accounting for, 108, 110
expatriate, defined, 133
expatriate compensation
cost-differential allowance, 151-156
currency fluctuations, 154-156
currency fluctuations in, 143
defined, 12
elements of, 57
tax protection, 144
expense accounts, 171
expense factor, 277
expense reimbursements. See reimbursements
expenses
amortization of net loss or net gain, 260-261
interest cost, 258
prior service cost, 259
return on plan assets, 258-259
service cost, 257
expensing. See accounting systems
expiration of options, accounting for, 109, 111
external labor market in HR planning, 42
F
Fair Labor Standards Act (FLSA), 22
fair value, defined, 203
fair value expensing, intrinsic value expensing versus, 101-103
FAS 123 standard, 103
FASB (Financial Accounting Standards Board), employee benefits standards, 188-190
FASB ASC 900s standards, 188
FASB ASC 965 standard, 189
administrative expenses, 196
benefit payments, 191
calculating benefit obligations, 194
claims incurred but not reported (IBNR), 194-196
employer contributions, 192-193
postemployment benefits, 192
postretirement health plan obligations, 197
postretirement retirement benefit obligations, 196
premium deficits, 192
premiums due, 191
premiums paid to insurance companies, 193
FAVR (fixed and variable rate) method, 181
FCF (free cash flow) as incentive compensation metric, 81-82
federal income tax withholding, 19
federal per diem rate, 183
Financial Accounting Standards Board (FASB), employee benefits standards, 188-190
financial performance metrics. See metrics
financial ratios, 272
financial reporting requirements. See reporting requirements
fixed and variable rate (FAVR) method, 181
fixed pay. See base salary
Flamholtz model. See reward valuation model (HR accounting)
flexible spending accounts (FSAs), 220-222
FLSA (Fair Labor Standards Act), 22
total compensation costs, 55-58
forecasting demand, 39
foreign service premium, 138
foreign tax credit, 148
forfeitures of stock options, 107-108
free cash flow as incentive compensation metric, 81-82
FSAs (flexible spending accounts), 220-222
G
GAAP (General Accepted Accounting Principles), 8
for employee benefits, 188-190
IFRS (International Financial Reporting Standards) versus, 119-121
gain/loss on PBO in pension calculations, 251-252
global payroll systems, 135, 156-159
global stock option plans, 161-164
Gould, Elise, 211
grade creep, 283
graded amortization (stock options), 106
grant date (stock options), 105
gross pay, net pay calculations, 18-19
gross profit, calculating, 13
gross-up calculations, 147
group valuation (HR accounting), 299
H
HDHP (high-deductible health plans), 215
headquarters staff, defined, 132
health and welfare plans. See also employee benefits
claims incurred but not reported (IBNR), 194-196
defined contribution versus defined benefit plans, 190-191
FASB ASC 965 standard, 191-197
financial reporting requirements, 202-207
IFRS (International Financial Reporting Standards), 201-202
postretirement health plan obligations, 197
health reimbursement arrangements (HRAs), 218-220
health savings accounts (HSAs), 215-218
cost containment alternatives, 214-228
consumer-driven healthcare, 214-222
corporate wellness programs, 225-227
discount drug programs, 227
self-funding of health benefits, 228
spousal coverage, 227
reasons for increases in, 209-214
health-promotion programs, 226-227
high-deductible health plans (HDHP), 215
high-low rate, 183
historical cost model (HR accounting). See acquisition cost model (HR accounting)
home-country employees, defined, 132
hourly workers, overtime pay, 18
house accounts, 175
housing allowance, 138
housing exclusion for expatriate taxes, 149-150
accounting standards and, 299-300
acquisition cost model, 292-294
opportunity cost model, 295-296
replacement cost model, 294-295
physical assets versus human assets, 289-291
present value of future earnings model, 296-297
reward valuation model, 297-299
valuation on a group basis, 299
HR analytics
effectiveness metrics
human capital effectiveness metrics, 277-279
internal HR operational metrics, 280
total compensation and benefits effectiveness, 280-284
HR outlays
as assets, 14
demand planning, 38
evaluation, 43
external labor market, 42
forecasting demand, 39
management action, 43
organization design and planning, 38-39
relationship with compensation function, 43-52
executive incentive plans, 50-51
job analysis and classification activities, 47-48
organization design and planning activities, 48-49
program administration activities, 49
program development activities, 44-47
total compensation activities, 51-52
HR process costs, 280
HR process cycle time, 280
HR service quality, 280
HRAs (health reimbursement arrangements), 218-220
HSAs (health savings accounts), 215-218
human assets, physical assets versus, 289-291
human capital effectiveness metrics, 277-279
I
IBNR (claims incurred but not reported), 194-196
IFAS (International Financial Accounting Standards), 8
IFRS (International Financial Reporting Standards)
employee benefits standards, 189-190, 201-202
GAAP (General Accepted Accounting Principles) versus, 119-121
accounting classifications, 14
cash incentive plans, categories of, 72
defined, 10
elements of, 57
executive incentive plans, relationship with HR planning, 50-51
EVA (Economic Value Added), 82-86
trends in, 73
incentive payout effectiveness, 283
incentive payout percentage, 283
incentive stock options (ISO), 113
income exclusions for expatriate taxes, 149-150
income-replacement ratio, 240-241
indirect labor, defined, 13
insurance companies
premiums paid to, 193
value of contracts with, 204
intangibles, 7
interest cost in pension calculations, 249, 258
internal HR operational metrics, 280
internal placement effectiveness, 275
international compensation
cost-differential allowance, 151-156
currency fluctuations, 143, 154-156
tax protection, 144
International Financial Accounting Standards (IFAS), 8
International Financial Reporting Standards (IFRS)
employee benefits standards, 189-190, 201-202
GAAP (General Accepted Accounting Principles) versus, 119-121
international tax implications of stock options, 116-121
intrinsic value as incentive compensation metric, 81
intrinsic value expensing, fair value expensing versus, 101-103
IRAs, 234
ISO (incentive stock options), 113
J
job analysis and classification activities
relationship with HR planning, 47-48
in total compensation function, 51
jobs, positions versus, 295
K
Kelley Blue Book, 182
KSAs (knowledge, skills, and abilities), 294
L
labor market, external, 42
lattice model for option pricing, 104
layoffs, 291
learning costs, 293
Liveris, Andrew N., 226
loans from defined contribution pension plans, 238-239
local staff, defined, 133
localization system, defined, 135
lump sum system, defined, 134
M
management action in HR planning, 43
managerial accounting, sales compensation plans in, 166-167
market index, 283
market value of assets, book value versus, 7
measurement date (stock options), 105
medical costs. See healthcare costs
balanced scorecard, as incentive compensation metric, 87-94
HR analytics
benchmarking effectiveness metrics, 274-277
human capital effectiveness metrics, 277-279
internal HR operational metrics, 280
total compensation and benefits effectiveness, 280-284
for incentive compensation, 77-81
EVA (Economic Value Added), 82-86
mitigation of risks, healthcare benefits as, 213-214
motivation, incentive compensation as, 72-74
N
negotiation system, defined, 135
net loss/gain in pension calculations, 260-261
net operating income after taxes (NOPAT), 278
new business, 169
new customer/new product bonus plans, 173
nonqualified stock options, 113
NOPAT (net operating income after taxes), 278
number of employees per HR staff, 275
O
offer-acceptance ratios, 280
offshore pension plans, 161
operating cash flow as incentive compensation metric, 80
operational financial plans, 33
OPEX (operating expenditures), 4
CAPEX (capital expenditures) versus, 7-8
opportunity cost model (HR accounting), 295-296
option pricing, 104
organization design and planning, 38-39, 48-49
overseas premium, 138
overtime pay, 18
P
participation rate (PR), 62
pay. See base salary
pay adders
accounting classifications, 14
defined, 11
payment of retirement benefits in pension calculations, 252
payroll systems
13th and 14th month pay, 22-23
expatriate compensation and, 156-159
salaried employees in, 22
tax implications for stock options, 120-121
transaction tracking in, 16-21
PBGC (Pension Benefit Guarantee Corporation), 246
PBO (projected benefit obligation), 245, 247-252
PC&T (population change and turnover), 63
pension benefit obligation, 245-252
calculating projected benefit obligation (PBO), 247-252
measurement methods, 245
PBGC (Pension Benefit Guarantee Corporation), 246
amortization of net loss or net gain, 260-261
components of, 244
interest cost, 258
prior service cost, 259
return on plan assets, 258-259
service cost, 257
pension plans. See also retirement benefits
accounting standards for, 265-266
accounting systems, reporting requirements, 262-265
defined, 232
defined benefit plans, 235
accounting systems for, 239-244
defined contribution plans, 235
accounting systems for, 236-238
pension benefit obligation, 245-252
calculating projected benefit obligation (PBO), 247-252
measurement methods, 245
PBGC (Pension Benefit Guarantee Corporation), 246
pension trust, employer responsibility for, 239-240
per diem allowances, 183
performance management process, 51
performance metrics. See metrics
perquisites, defined, 11
personal replacement cost, 294
physical assets, human assets versus, 289-291
planning process. See also forecasting
framework for, 30
demand planning, 38
evaluation, 43
external labor market, 42
forecasting demand, 39
management action, 43
organization design and planning, 38-39
relationship with compensation function, 43-52
population change and turnover (PC&T), 63
positional replacement cost, 294
positions, jobs versus, 295
postemployment benefits
FASB ASC 965 standard, 192
postretirement health plan obligations, FASB ASC 965 standard, 197
postretirement retirement benefit obligations, FASB ASC 965 standard, 196
PR (participation rate), 62
precertification reviews, 222-223
premium deficits, FASB ASC 965 standard, 192
premiums due, FASB ASC 965 standard, 191
premiums paid to insurance companies, FASB ASC 965 standard, 193
prescription drug discount programs, 227
present value of accumulated benefits (PVAB), 264
present value of future earnings model (HR accounting), 296-297
presenteeism, 225
preventive services, 226
prior service cost in pension calculations, 249-251, 259
problem anticipation in HR planning, 49
product mix, 169
profit planning, 33
program administration activities, relationship with HR planning, 49
program development activities, relationship with HR planning, 44-47
projected benefit obligation (PBO), 245, 247-252
projecting. See forecasting
promotion (PRO) expenses, 64
purchase orders in sales compensation plans, 176-177
PVAB (present value of accumulated benefits), 264
Q
qualified stock options, 113
quota clubs, 171
quota targets, list of, 169
R
recruiting, relationship with HR planning, 43-44
reduction-in-force decisions, 291
regional system, defined, 135
regular federal per diem rate, 183
for employee expenses, 177-179
relocation expenses, 138
replacement cost model (HR accounting), 294-295
commission expenses, 167
defined contribution pension plans, 265
health and welfare plans, 202-207
reserves, 174
residual income (RI) as incentive compensation metric, 86-87
restricted stock awards, 97-100, 162
retaining sales, 169
accounting classifications, 14
accounting standards for, 265-266
accounting systems
for defined benefit plans, 239-244
for defined contribution plans, 236-238
reporting requirements, 262-265
defined, 11
defined contribution versus defined benefit plans, 235
pension benefit obligation, 245-252
calculating projected benefit obligation (PBO), 247-252
measurement methods, 245
PBGC (Pension Benefit Guarantee Corporation), 246
amortization of net loss or net gain, 260-261
interest cost, 258
prior service cost, 259
return on plan assets, 258-259
service cost, 257
postretirement retirement benefit obligations, 196
retirement factor, 241. See also income-replacement ratio
retrospective reviews, 224
return on human resource investments. See HR accounting
return on plan assets in pension calculations, 258-259
revenue expenditures, 4. See also OPEX (operating expenditures)
revenue per employee, 275, 277
reward valuation model (HR accounting), 297-299
RI (residual income) as incentive compensation metric, 86-87
risk benefits, defined, 11
risk mitigation, healthcare benefits as, 213-214
S
salaried employees
13th and 14th month pay, 22-23
in payroll systems, 22
salary. See base salary
salary programs, planning, 45
salary-compression problems, 45-46
sales bonus plans, 173, 175-177
sales commission payments
defined, 169
sales volume as trigger for, 170-171
accounting control and audit issues, 175-177
in accounting systems, 166-168
commission accounting software, 183-184
advantages of base, commission, and bonus plans, 170-171
sales targets, 169
sales volume as commission trigger, 170-171
sales contests, 171
sales quota clubs, 171
sales targets, list of, 169
SARs (stock appreciation rights), 122-126
Schraeder, Mike, 73
self-funding of health benefits, 198-201, 228
selling, general, and administrative (SG&A) expenses, 166
service cost in pension calculations, 248-249, 257
service inception date (stock options), 106
settling-in allowance, 139
SFAS 87 standard, 266
SFAS 109 standard, 113
SFAS 110 standard, 188
SFAS 123(R) standard, 104
SFAS 158 standard, 243, 265-266
SG&A (selling, general, and administrative) expenses, 166
ESPPs (employee share purchase plans), 121-122
explained, 96
restricted stock awards, 97-100
SARs (stock appreciation rights), 122-126
international tax implications, 116-121
short-term benefits, IAS 19 standard, 201
short-term incentives. See incentive compensation
span of control factor, 283
spendable income, 143
split commissions, 174
split-payment arrangements, 154-155
spousal coverage, 227
standard meal allowance, 183
standard mileage method (automobile allowances), 180-181
state income tax withholding, 19
statement of accumulated plan benefits for defined benefit pension plans, 264
statement of changes in accumulated plan benefits for defined benefit pension plans, 264
statement of changes in net assets available for plan benefits, 205-206
statement of net assets available for plan benefits, 203-205
stochastic rewards valuation model. See reward valuation model (HR accounting)
stock appreciation rights (SARs), 122-126
contingencies in stock plans, 111-112
expiration of options, 109, 111
fair value versus intrinsic value expensing, 101-103
international tax implications, 116-121
SARs (stock appreciation rights), 122-126
stocks
ESPPs (employee share purchase plans), 121-122
restricted stock awards, 97-100
SARs (stock appreciation rights), 122-126
international tax implications, 116-121
stop-loss coverage, 200
straight-line amortization (stock options), 106
strategic financial plans, 33
supply versus demand in HR analytics, 284-285
T
talent management
demand planning, 38
forecasting demand, 39
organization design and planning, 38-39
talent reviews
defined, 40
in program administration, 49
tax gross-up calculations, 147
tax implications
of expatriate compensation, 143-151
tax protection, 144
of expense allowances, 177-179
international tax implications of stock options, 116-121
tax withholdings, 18
federal income tax withholding, 19
state income tax withholding, 19
TCN (third-country nationals), 133
termination benefits, IAS 19 standard, 202
terminology for compensation and benefits, 8-12
theory of constraints in HR planning, 43
third-country nationals (TCNs), 133
three-prong approach to retirement security, 233
top-up offshore pension plans, 161
total compensation activities, relationship with HR planning, 51-52
total compensation and benefits effectiveness metrics, 280-284
total compensation costs
list of, 281
touch labor, defined, 13
training and development, relationship with HR planning, 43-44
training costs, 280
training evaluation, 280
training investments, 275
tranche (stock options), 106
transaction tracking in payroll systems, 16-21
turnover rate, 278
U
underfunded pension plans, 254-255
unfunded defined benefit pension plans, 246
uninsured people, costs of, 211
unions, effect on defined benefit pension plans, 241, 255
upselling, 169
Ustian, Dan, 225
concurrent reviews, 223
precertification reviews, 222-223
retrospective reviews, 224
V
valuation on a group basis (HR accounting), 299
value-based models (HR accounting), 296-299
present value of future earnings model, 296-297
reward valuation model, 297-299
valuation on a group basis, 299
variable costing for sales compensation plans, 166-167
VBO (vested benefit obligation), 245
vesting in restricted stock awards, 98
voluntary turnover, predicting, 279
W
Wallace, James S., 87
win-back sales, 169