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Keys to a Successful Partnership with Finance

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Keys to a Successful Partnership with Finance

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To be successful in any job or sport, there is always a key partnership that is critical and most important.  In baseball, it’s the pitcher and catcher. In American football, it is the quarterback and center.  In Compensation, the relationship and partnership with Finance is essential.  In all three examples, each individual and organization has to be in sync with the other to avoid fumbles, passed balls, and missed opportunities.

For over 30 years I have had the pleasure of working with some fantastic Finance partners. When thinking about what made the partnerships great, four (4) common themes were always there.

There Was Trust

In every situation, we knew we each had the best of intentions and that we would have “each other’s back”.  We would make sure no one was surprised and that we were both prepared and showed-up well to meetings especially with senior leadership.

Tough Conversations Were Held Behind Closed Doors

As in any partnership, both parties want the best outcome.  To do this, it is essential to have tough conversations in a way that is safe.  Only by having those open and honest conversations can you understand each other’s perspective and get to the best answer.  As in any good personal relationship, it’s best to have those conversations behind closed doors so both parties feel safe and secure.

We Agreed to Disagree

We always desired to be aligned in the recommendation; however, that didn’t always happen.  In those times, we agreed to disagree. We believed everyone had valid points and the best answer was a matter of perspective or desired outcome. Fortunately, this did not happen often but when it did, we took all of the information to senior management and presented both sides equally sharing our perspectives.  This approach allowed each of us to be heard and management to make an informed decision.

We Validated the Math & Models

A good portion of what a compensation professional does involves math and models. And, when designing programs for large groups of employees, the numbers start getting pretty big and can impact the bottom-line.  Don’t keep your models secret and instead share your models with Finance and have them validate your methodology, assumptions, and results. When meeting with the CFO, CEO or the Compensation Committee, it is great to have everyone giving a thumbs up on the analysis and results.

To win a baseball or football game takes time and practice.  Building a great partnership also takes time and you have to be intentional about it.  Reach out and get to the know your partner personally as well as professionally.  Not only will the partnership be great and help both of you be successful, you might just find that you made a really good friend as well.

To read other blogs, go here: https://alliancecompensation.com/blog/

To see our Linked-In company page, go here: https://www.linkedin.com/company/alliance-compensation-llc/about/

David Adent is a Managing Partner with Alliance Compensation LLC, a team of seasoned experts and trusted solution for clients across the Western US in public and private companies. He has over 30 years of experience in corporate and executive compensation roles, and lives with his wife in Spokane, WA.

To be successful in any job or sport, there is always a key partnership that is critical and most important. In Compensation, the relationship and partnership with Finance is essential.

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Increase Your Impact, When to Hire an Expert

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Increase Your Impact, When to Hire an Expert

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If you are like me, you like to do things yourself. I generally know how long things will take and I like the satisfaction of saying “I did it”.  But there are times when I pause and ask myself does it make sense for me to do this. This is especially true when there is a lot on my plate, and I must choose between working on projects or on a relatively simple but urgent request.

For me personally, I really dislike plumbing and I’m not good at it. No matter what I do I seem to struggle to squeeze into those little spaces and feel like I am going to break my arm. And there always seems to be a leak when I’m done. So, even though I don’t like to spend the money on plumbing, for me an expert is always the way to go!

At your company, there are several situations where it makes sense to go with an expert including:

  1. You do not have someone on your team with the knowledge or experience,
  2. When you are dealing with issues that impact a very sensitive employee group or a lot of employees where it is critical to get it right,
  3. When you need or have to improve credibility with stakeholders including management or employees,
  4. There are special laws that need to be considered and you just don’t deal with them on a regular basis,
  5. You have team members who are on leave or vacation, and of course,
  6. Your team is already at or beyond capacity and you do not need or want to hire someone but you just could use the extra hands.

When thinking about executive compensation, it makes sense to get help from an expert when hiring executive officers. There are a lot of factors to consider in this situation including internal equity, employee perceptions for publicly disclosed compensation information, the Compensation Committee, the Board of Directors, and how your investors and shareholder advisory groups will view the situation. Making a mistake here can create headaches for you when it comes time to seek shareholder approval of your executive compensation practices or proposals.

When you do decide to hire an expert, remember, their help can take many forms.

Extension of Your Team

We all know that during the year, there are times when there is more work than our teams can handle. Also, our staff will take vacations or go on family medical leave. Consider hiring a partner who can act as an extension of your team with dedicated hours to do what you need done for a period of time or just be available when you need help. Your partner can help with critical projects or the day-to-day work (e.g., market pricing or job offers) so you can focus on other priorities.

Complete Creation

In this situation the experts will create the design, or fine tune yours, and then create everything that supports rolling out the design including presentations, communications, and plan documents. This approach is great when you do not have the expertise OR bandwidth for the project.

Co-Author Work In Partnership

This is a great idea when you want to be involved in the work while getting expert help. Your company can learn a lot using this approach.  Remember, this also creates a situation where you are partners and have an equal stake in the results. I was fortunate to partner and co-present with Jeremy Erickson of Pillsbury Winthrop Shaw Pittman LLP and Jon Burg of Infinite Equity on the impact of the CEO Pay Ratio requirements at a Global Equity Organization conference. Partnering with Jeremy and Jon provided the opportunity to gain expertise and directly apply it in a business setting.

Plan/Content Review

External viewpoints can be very helpful when making sure your proposed designs, plans, programs and/or content are designed and communicated well. External advisors typically look at things differently since they have exposure to multiple companies and designs. You will most likely appreciate their insights and suggested improvements. And, it provides you the ability to say an expert agrees with your approach.

Doing projects yourself is very satisfying; however, there are times when hiring an expert is the right choice especially when you use a model that works well for you and your company.  Each project and situation is different; trust your judgement on when to “jump in the pool” and hire someone.  For me, hiring a plumber is always the right thing to do!

To read other blogs, go here: https://alliancecompensation.com/blog/

To see our Linked-In company page, go here: https://www.linkedin.com/company/alliance-compensation-llc/about/

David Adent is a Managing Partner with Alliance Compensation LLC, a team of seasoned experts and trusted solution for clients across the Western US in public and private companies. He has over 30 years of experience in corporate and executive compensation roles, and lives with his wife in Spokane, WA.

Doing projects yourself is very satisfying; however, there are times when hiring an expert is the right choice especially when you use a model that works well for you and your company.

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2021 Compensation & Benefit Limits

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2021 Compensation & Benefit Limits

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As we bring in the new year, we should keep in mind a few changes with respect to the 2021 Compensation and Benefit limits.

401(k) Plan Limits

Employee 401(k) contributions for plan year 2021 will once again top off at $19,500 with an additional $6,500 “catch-up” contribution allowed for those turning age 50 or older. But maximum contributions from all sources (employer and employee combined) will rise by $1,000.

For employee contributions to 401(k)-type plans, the news is “no changes” for 2021, whereas last year saw a $500 jump in the overall employee contribution limit for 2020 plus a $500 rise in the catch-up limit. The annual defined contribution limit from all sources increases from $57,000 to $58,000 (plus the $6,000 catch-up if age 50 or older), or 100 percent of an employee’s compensation.

The annual ceiling on employee compensation that can be used to calculate employee deferral and employer matching contributions also is increasing to $290,000 from $285,000.

The limit used to define a highly compensated employee for nondiscrimination testing remains at $130,000, as well as the dollar limit for defining key employees in a top-heavy plan remains at $185,000.

Health Savings Account and High-Deductible Health Plan Limits

For 2021, the IRS announced an increase in health savings account (HSA) contribution limits. An individual with coverage under a qualifying high-deductible health plan (deductible not less than $1,400) can contribute up to $3,600 — up $50 from 2020 — for the year to their HSA. The maximum out-of-pocket has been capped at $7,000.

An individual with family coverage under a qualifying high-deductible health plan (deductible not less than $2,800) can contribute up to $7,200 — up $100 from 2020 — for the year. The maximum out-of-pocket has been capped at $14,000.

The $1,000 catch up contribution available to accountholders aged 55 and over is not tied to a cost of living adjustment and thus, remains at $1,000.

Social Security & Medicare Rates & Limits

President-elect Joe Biden, according to the tax plan he released before the election, may enact of number of policies that would raise taxes on individuals with income above $400,000, including raising individual income, capital gains, and payroll taxes. The details of Biden’s tax plan are still being finalized.

For earnings in 2021, the maximum taxable earnings limit is increasing to $142,800 from $137,700. 

The OASDI tax rate for wages paid in 2021 is set by statute at 6.2 percent for employees and employers, each. Thus, an individual with wages equal to or larger than $142,800 would contribute $8,853.60 to the OASDI program in 2021, and his or her employer would contribute the same amount. The OASDI tax rate for self-employment income in 2021 is 12.4 percent.

For Medicare’s Hospital Insurance (HI) program, the tax rates are 1.45 percent for employees and employers, each, and 2.90 percent for self-employed persons.

For a summary of these changes, please refer to the table below.

Nancy Ellington is a Managing Partner with Alliance Compensation LLC, a team of seasoned experts and trusted solution for clients across the Western US in public and private companies. She has over 30 years of experience in corporate leadership roles and consulting, and lives with her husband and two kids in Redmond, WA.

As we bring in the new year, we should keep in mind a few changes with respect to the 2021 Compensation and Benefit limits. 401(k) Plan Limits Employee 401(k) contributions for plan year 2021 will once again top off at $19,500 with an additional $6,500 “catch-up” contribution allowed for those turning age 50 or older. […]

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