Accounting for Compensation and Employee Benefits

Accounting for Compensation and Employee Benefits

Introduction

There include many reasons for the success of any organization, one of them include the management and utilization of organization's resources in a most efficient manner. Among the organizational resources, one of the most important resources includes the human resources, which provide their valuable services to the organization against the salary, pay, wage, and/or compensation they receive from their employer. Human resources have not been considered a core area of organization in the past. However, with the changing trends, large organizations sensed a need of specialized personnel for performing the task of human resource management, and eventually with the success sought by such organizations; other small and medium sized organizations also followed the suit.

Human resources management is a very broad field, where HR professionals are involved in several key roles and responsibilities. Some of the major responsibilities include recruiting, selecting, training and development, performance management, succession planning, competency building, and compensation and benefits programs. Compensation and benefit are the areas of human resource management which, if applied effectively, tend to motivate and persuade employees to enhance their performance. Compensation includes salaries and wages an employee and/or other staff of the organization receives against their designation and roles in the organization (Mathis, & Jackson, 2011). Whereas, benefits include incentive and bonuses an employee or staff member receives against his/her extraordinary performance. Examples of benefits include life insurance, health care package, paid leaves, and other intrinsic benefits which include appreciation and/or giving a higher rank to an employee in a hierarchy.

This research paper is based on highlighting the accounting treatment and disclosures related to three types of compensation and other benefits. In addition to that, it will also demonstrate the advantages and disadvantages of the benefits for the organization and how it will impact the performance and growth of organization.

Discussion

Three Types of Compensation and Other Benefits

It has been discussed that what compensation and benefits are comprised of, however, another critical factor in this area is the three basic types of compensation and benefits. These are base compensation and benefits, variable compensation and benefits, and supplementary compensation and benefits. Base compensation includes the basic salary and wages an employer receives against his/her services. Variable compensation includes the compensation an employee receives as he/she completes the tasks at hand (Biswas, 2012). Supplementary compensation includes the compensation which an employer gives to its employee whenever he/she wishes to. Supplementary compensation is not compulsory for the employer to pay. It is paid when an employer feels much satisfied with the work of his employee.

Accounting Treatment and Disclosures

Compensation and benefits need accounting treatment and disclosures in order to manage the income statement and balance sheet of the organization in an effective way. The classification for accounting treatment of compensation and benefits according to IAS 19 are as follows:

Short-term benefits are the benefits which are to be paid within one year to the employees after they provide their services to the employees. Employees, in this classification, are compensated for ...