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How To Use Finance and Accounting in HR (Collection)

Book Description

In Compensation and Benefit Design, Bashker D. Biswas shows exactly how to bring financial rigor to the crucial "people" decisions associated with compensation and benefit program development. This comprehensive book begins by introducing a valuable Human Resource Life Cycle Model for considering compensation and benefit programs. Next, Biswas thoroughly addresses the acquisition component of compensation, as well as issues related to general compensation, equity compensation, and pension accounting. He assesses the full financial impact of executive compensation programs and employee benefit plans, and discusses the unique issues associated with international HR systems and programs. This book contains a full chapter on HR key indicator reporting, and concludes with detailed coverage of trends in human resource accounting, and the deepening linkages between financial and HR planning. Replete with both full and "mini" case examples throughout, the book also contains chapter-ending exercises and problems for use by students in HR and finance programs.


HR managers are under intense pressure to become strategic business partners. Many, unfortunately, lack the technical skills in financial analysis to succeed in this role. Now, respected HR management educator Dr. Steven Director addresses this skill gap head-on. Writing from HR's viewpoint, Director covers everything mid-level and senior-level HR professionals need to know to formulate, model, and evaluate their HR initiatives from a financial and business perspective. Drawing on his unsurpassed expertise working with HR executives, he walks through each crucial financial issue associated with strategic talent management, including the quantifiable links between workforces and business value, the cost-benefit analysis of HR and strategic financial initiatives, and specific issues related to total rewards programs. Unlike finance books for non-financial managers, Financial Analysis for HR Managers focuses entirely on core HR issues.

Table of Contents

  1. About This eBook
  2. Title Page
  3. Copyright Page
  4. Table of Contents
  5. Compensation and Benefit Design: Applying Finance and Accounting Principles to Global Human Resource Management Systems
    1. Copyright Page
    2. Dedication Page
    3. Foreword
    4. Acknowledgments
    5. About the Author
    6. Preface
    7. Part I
      1. 1. Introduction: Setting the Stage
        1. The Cost Versus Expense Conundrum
        2. CAPEX Versus OPEX
        3. The Current HR Cost-Classification Structure
        4. The Current Accounting for Compensation and Benefit Cost Elements
        5. Key Concepts in This Chapter
        6. Appendix: The Terms
      2. 2. Business, Financial, and Human Resource Planning
        1. The Overall Planning Framework
        2. HR Planning
        3. HR Programs
        4. Key Concepts in This Chapter
        5. Appendix
      3. 3. Projecting Base Compensation Costs
        1. Base Salary Costs
        2. Key Concepts in This Chapter
        3. Appendix: Cash Flow Impact of Salary Increases
      4. 4. Incentive Compensation
        1. An Introduction to Incentive Compensation Programs
        2. Accounting for Annual Cash Incentive Plans
        3. Key Incentive Compensation Metrics
        4. Free Cash Flow as an Incentive Plan Metric
        5. Economic Value Added as an Incentive Plan Metric
        6. Residual Income as an Incentive Compensation Plan Metric
        7. The Balanced Scorecard and Incentive Compensation
        8. Balanced Scorecard and Compensation
        9. Key Concepts in This Chapter
      5. 5. Share-Based Compensation Plans
        1. Stock Award Plans
        2. Stock Option Plans
        3. Stock Option Expensing
        4. The Accounting for Stock Options
        5. Tax Implications of Stock Plans
        6. International Tax Implications of Share-Based Employee Compensation Plans
        7. Employee Share Purchase Plans
        8. Stock Appreciation Rights
        9. Key Concepts in This Chapter
        10. Appendix: Stock Options and Earnings per Share
      6. 6. International and Expatriate Compensation
        1. The Background to International and Expatriate Compensation
        2. The Balance Sheet System
        3. Expatriate Taxes
        4. The Cost-Differential Allowance
        5. Global Payroll Systems
        6. International Pensions
        7. Global Stock Option Plans
        8. Key Concepts in This Chapter
      7. 7. Sales Compensation Accounting
        1. General Accounting Practices
        2. Sales Compensation Plans
        3. Accounting Control and Audit Issues
        4. Other Salient Elements of a Sales Compensation Plan
        5. Travel Allowances
        6. Commission Accounting
        7. Key Concepts in This Chapter
      8. 8. Employee Benefit Accounting
        1. The Standards Framework
        2. Defined Contribution Versus Defined Benefit Plans
        3. Section 965 Explained
        4. Calculating Plan Benefit Obligations
        5. Claims Incurred but Not Reported (IBNR)
        6. Other Benefit Obligations
        7. Additional Obligations for Postretirement Health Plans
        8. Self-Funding of Health Benefits
        9. International Financial Reporting Standards and Employee Health and Welfare Plans
        10. The Financial Reporting of Employee Benefit Plans
        11. Key Concepts in This Chapter
      9. 9. Healthcare Benefits Cost Management
        1. The Background
        2. The Reasons for the Rising Costs
        3. Cost Containment Alternatives
        4. Forecasting Healthcare Benefit Costs
        5. Key Concepts in This Chapter
      10. 10. The Accounting and Financing of Retirement Plans
        1. The Background
        2. The Accounting of the Plans
        3. The Pension Benefit Obligation
        4. Pension Plan Assets
        5. The Pension Expense
        6. The Accounting Record-Keeping
        7. Accounting Standards Affecting Pension Plans
        8. Key Concepts in This Chapter
    8. Part II
      1. 11. Human Resource Analytics
        1. The Background for the Use of HR Analytics
        2. The Need for HR Analytics
        3. Measuring the Effectiveness of HR Investments
        4. Total Compensation Effectiveness Metrics
        5. A Changed Paradigm
        6. Key Concepts in This Chapter
      2. 12. Human Resource Accounting
        1. The Background
        2. The Debate
        3. HR Accounting Methods
        4. Key Concepts in This Chapter
        5. Appendix: No Long-Term Savings from Workforce Reductions
    9. Conclusion
      1. An HR Finance and Accounting Audit
    10. References
      1. Articles
      2. Books
      3. Websites
    11. Index
  6. Financial Analysis for HR Managers: Tools for Linking HR Strategy to Business Strategy
    1. Copyright Page
    2. Dedication Page
    3. Acknowledgments
    4. About the Author
    5. 1. Business Strategy, Financial Strategy, and HR Strategy
      1. Is HR Weakest in the Most Critical Areas?
      2. You Don’t Need to Be a Quant to Make Good Business Decisions
      3. Which HR Decisions Are Important?
      4. What This Book Attempts to Do
    6. 2. The Income Statement: Do We Care About More Than the Bottom Line?
      1. Income Statements
      2. Profit Can Be Measured at Various Levels
      3. Seeing the Big Picture
      4. The Bottom Line
    7. 3. The Balance Sheet: If Your People Are Your Most Important Asset, Where Do They Show Up on the Balance Sheet?
      1. Assets on the Balance Sheet
      2. Liabilities on the Balance Sheet
      3. Which Numbers on a Balance Sheet Can You Believe?
      4. Use Caution When Using Published Financial Ratios
    8. 4. Cash Flows: Timing Is Everything
      1. Cash Flow Information from the Income Statement
      2. Cash Flow Information from the Balance Sheet
    9. 5. Financial Statements as a Window into Business Strategy
      1. Common Size Financial Statements
      2. Connecting the Dots
      3. Return on Equity
      4. Differential Impact of Financial Leverage
      5. The Big Picture
      6. The Link Between HR Strategy and Business Strategy
    10. 6. Stocks, Bonds, and the Weighted Average Cost of Capital
      1. Why Is the Cost of Capital Important to HR Managers?
      2. Where Does the Money Come From?
      3. Is Your Company of Above Average or Below Average Risk?
      4. Capital Costs in 2012
    11. 7. Capital Budgeting and Discounted Cash Flow Analysis
      1. Calculating Present Values
      2. Do the Future Benefits Justify the Upfront Costs?
      3. Using DCF on the Job
      4. HR Applications
      5. Money Has Time Value Because of Interest Rates, Not Because of Inflation
    12. 8. Financial Analysis of Human Resource Initiatives
      1. Decisions Involving Cash Flow That Occur at Different Points in Time
      2. Allocating Budgets When There Are a Larger Number of Alternatives
      3. Calculating NPV of Specific HR Initiatives
      4. Determining Program Impacts Using Pre-Post Changes
      5. Determining Program Impacts Using Comparison Groups
      6. What Is Your Firm’s HR Budget?
      7. Is Your HR Budget Allocation Optimal?
      8. Maximizing the ROI on Your Analysis Efforts
    13. 9. Financial Analysis of a Corporation’s Strategic Initiatives
      1. Estimating the NPV of a Strategic Initiative Such as a New Product Introduction
      2. Using the Spreadsheet to Structure the Deal
      3. Using Monte Carlo Simulations to Model Risk and Uncertainty
    14. 10. Equity-Based Compensation: Stock and Stock Options
      1. How Do Stock Options Work?
      2. What Is the Intrinsic Value of an Option? What’s the Time Value of an Option?
      3. Are Options High-Risk Investments?
      4. Do Employees Prefer Options or Stock?
      5. Understanding the Inputs to the Black-Scholes Model
      6. Firms Must Disclose the Methods and the Assumptions They Use to Cost Stock Options
      7. Using Monte Carlo Simulation to Determine the Value of Employee Stock Options
      8. Dilution, Overhang, and Run Rates
      9. Equity Compensation Is One Tool for Aligning Executive and Shareholder Interests
    15. 11. Financial Aspects of Pension and Retirement Programs
      1. Defined Benefit (DB) Plans
      2. Defined Contribution (DC) Plans
      3. Hybrid Plans
      4. The Shift from DB Plans to DC Plans
      5. Pension Accounting
      6. Why Base Costs on the Expected Rather Than the Actual Return on Plan Assets?
      7. How Do Firms Select the Appropriate Discount Rate?
      8. DB Plans Encourage Retirement
      9. The Future?
    16. 12. Creating Value and Rewarding Value Creation
      1. Aligning Pay with Performance
      2. Managing EPS Expectations
      3. Putting It All Together
      4. Appendix A: A Sample of Financial Measures Currently in Use
    17. Bibliography
    18. Endnotes
      1. Chapter 1
      2. Chapter 2
      3. Chapter 3
      4. Chapter 5
      5. Chapter 6
      6. Chapter 7
      7. Chapter 8
      8. Chapter 9
      9. Chapter 10
      10. Chapter 11
      11. Chapter 12
    19. Index
    20. FT Press