As always, our goal is to provide practical guidance for HR professionals who are navigating the various compensation minefields. One area where seemingly benign decisions or oversights can result in big problems is during preparation for focal reviews. We thought we’d pass along some Do’s and Don’ts resulting from our own (often hard-gained) experience.

• Assign the lowest level or newest person in the department to manage the annual reviews;
• Allow managers to change any spreadsheets other than in the data entry fields;
• Refer managers to manuals and reference books in lieu of online or personal guidance
• Use employee names instead of unique codes as individual identifiers, leaving you with duplicates that you can’t sort out.
• Ignore the laws related to salary increases and incentives (executive compensation, auditing salary decisions, international privacy);
• Transmit any passwords via email
• Forget to inform managers about eligibility rules and guidelines;
• Neglect problem situations (over-budget managers, extraordinary increases, etc.) until the last minute;
• Assume that there won’t be transfers and terminations during the planning process;
• Forget to plan for how you will get the incentive plan metric results when you need them

• Confirm the organizational hierarchy (who reports to whom) before you start;
• If you have them, remember the international locations and give them an early heads-up; it often takes them longer to compile data from multiple systems.
• Check in advance to make sure your HRIS system has all information entered correctly;
• Double check the budgets for managers -- and remember that this is the most important number to them.
• Build in audits and recordkeeping for future audits;
• If you use spreadsheets, protect critical fields you’re transmitting with strong passwords.

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WINNING THE DATA GAME: Which Market Surveys Do You Choose, and Why Does it Matter?

Slogging through the job matches and other data in annual market surveys – or even just figuring out which surveys to use – is a daunting and very often confusing task. It can mire you in a aggravating guessing game when it comes to sorting through multiple variations on job titles and salary benchmarks. This article will show you how to sift though market survey data like a seasoned veteran, and how to apply your best professional judgment to all the variables.

Decisions to make before you look at the data

• Which data element will be the important one for your organization? Does it vary by functional area or employee level? Are you going to look at the weighted or un-weighted results? Percentiles or averages?
  
• If your incentive plan is based on financial results, what do you compare to market when those results are really bad…or really great? Plan ahead for these circumstances and ensure that you have management’s agreement on the approach.
  
• Are you looking at Total Cash Compensation for everyone, or just those who are eligible for an incentive program? Many surveys provide both, so be sure you know what you want.
  
• How big a difference from market will be of concern to you? If your pay falls five percent below market, will you consider that a problem? Only for certain key jobs? What will you consider significantly above market?
  
• Which of your jobs do you consider “benchmarks”? It is key in your analysis to know which jobs you can count on for good market data. Those with the highest number of incumbents—across the broadest breadth of companies—will give you the most reliable results.
  
• Who is your contact at the survey company if you have questions?

How Good are Your Matches and How Good are Theirs?

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TERM OF THE DAY: Employee Stock Option

An employee stock option is a binding promise the employer makes to an employee that they can purchase the company’s stock in the future at a set price. The price is usually fixed at the market value of the stock as of the official date of the option grant.

The employee can exercise this right to purchase at some time in the future (presumably after the shares have risen well above the option price). Companies describe stock options as “incentives” because they are supposed to encourage the employee to help the stock price grow.

There are a number of rules surrounding stock options and a variety of option types. The one described above, a non-qualified stock option, is the most common. Here are some others.

A Performance Stock Option can only be exercised if certain company (usually financial) objectives are met.

An Incentive Stock Option is NOT based on company performance but is different because of its tax treatment.

A Discounted Stock Option is granted at below market price. This option receives special tax treatment, which recognizes that there was value in the option from day one.

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A. 4.8%

B. $11,334

C. 20.2%

D. 17.2%

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WHAT THE EXPERTS ARE SAYING

If you haven’t yet discovered the Evil HR Lady, you’re missing one of the most entertaining and informative bloggers in the HR arena. Suzanne Lucas has taken on the persona of the cynical but brilliant HR generalist who enlightens the working community on the good and the bad of their everyday actions. Find her snarky pearls of wisdom at evilhrlady.org.

Questions? Comments? Email us at cnotes@stewartdaly.com

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