Compensation & Benefits Review

This article examines the current state of compensation surveys, including a review of the broad range of compensation surveys available ranging from large published surveys to magazine surveys and repackaged survey data. The issues surrounding participation, quality and the applicability of the data are discussed. The article also suggests actions that compensation stakeholders can take to improve the integrity of external market pay data as a reliable tool.

The point factor method of job evaluation is one of the most popular and enduring approaches to linking the market and internal value of jobs. Statistically, regression analysis is used to create a market line that allows the organization to predict the market value of its jobs using point scores that define the jobs’ internal values. While attention is given to the fact that the market line represents the statistically “best” option for predicting these market rates, overlooked is the fact that these predictions almost always differ from the jobs’ actual market rates. This article explores the impact of this prediction error in compensation planning. It uses data on 41 jobs to define a market line using simple regression and identify the errors associated with the line’s predicted market values. It provides methods for precisely defining the extent of this prediction error and for minimizing it. It also discusses the impact of this error on the interpretation of salary grades, and the need for policy on key compensation planning issues to minimize the negative impact of prediction error.

Unlike the popular market-value stock options, stock awards and stock appreciation plans, phantom stock plans do not involve ownership of publicly-traded stock, although market-based stock may be used as a measurement of the phantom stock plan. Another popular method for valuing phantom stock plans is book value (i.e. assets minus liabilities). It is important to note that phantom stock plans can incorporate any design features of a market-based plan. However, under FAS 123R, phantom plans will be treated as a liability award and subject to a variable accrual, unlike market based plans which are considered equity awards and fixed accounting using a pricing model. The company has a tax deduction at time of the recipient having taxable income in the same amount of such income.

In California, ongoing concerns about employers stealing wages from undocumented immigrant workers (who are reluctant to report employer violations because they want to minimize contact with legal authorities) have led to two “antiretaliation” laws passed in 2013 (Assembly Bill 263 and Senate Bill 666) designed to protect workers. This article describes wage stealing (when, how, why and to whom it happens) and its consequences and evaluates various solutions to the problem, including the recent California legislation.

Organization culture and compensation system design function as complementary elements in achieving the strategic goals of the organization. When compensation systems are not aligned with organization culture, it causes many unintended consequences. This research study looks at the impact of organization culture on compensation and vice versa. Various frameworks provided in this article will help managers in effectively managing compensation costs as well as enhancing performance of the organizations. The organization culture can be shaped by the type of compensation system used and the kinds of behaviors and outcomes the organization chooses to reward and punish. When culture and compensation structure (fixed pay vs. variable pay) are synchronized, the culture acts as an asset and generates competitive advantage. Depending on how compensation system is designed, developed, communicated and managed, it can positively or negatively influence an organization’s culture. This research identifies compensation strategies for various types of organization culture and suggests the best-case scenario for optimal performance.

Ever-increasing competitive markets, changing business dynamics, technological advancements and specialization have made the traditional supervisor–employee feedback largely obsolete. To better compete globally, organizations have started to move from traditional hierarchical structures to team-based, flattened structures. Rating sources both inside and outside the organization provide key information that can help companies to be more adaptive. The practice of gathering performance feedback from multiple sources i.e 360-degree feedbackhas evolved from an innovative technique to a must-have tool in the overall performance and human resource management strategy. This article aims to explore the implementation of 360-degree feedback mechanisms in select IT organizations. Also, the article aims to explore the problems and challenges faced by employees in the implementation of multisource feedback. The article also provides suggestions for the improvement of 360-degree feedback process in IT industry.

Taxable pension obligation bonds (POBs) emerged in 1993 and have been issued extensively by a number of state and local governments. POBs are almost always general obligation bonds (GOBs or GO bonds). They convert “soft” unfunded pension liabilities on the pension plans balance sheet into “hard” bond debt on the governmental employer’s balance sheet. California has been one of the big issuers of POBs. Due to a court decision requiring voter approval, the State of California has not issued POBs as have some states. However, a judicially created loophole allows county, municipal and other local governments to issue such pension bonds without voter approval and without regard to state constitutional debt limits. Many have done so. Bond issues are usually insured by one of a handful of Wall Street bond insurers. There have been a number of Chapter 9 municipal bankruptcies in California including that of the City of Stockton. The combination of POBs, bond insurers and Chapter 9 proceedings can result in an outcome that allows a government to transfer a large amount of unfunded pension debt to a bond insurer. That’s what happened in Stockton. There may be others.