Employee Compensation Audit Checklist

Employee salary, bonus, incentive and stock option programs should be reviewed or audited annually to determine their effectiveness, competitiveness and legal compliance.

Following are key questions to ask in this employee compensation review process.

1. Has the company recently changed its business strategy? If yes, has the executive management compensation plan been reviewed to determine if it supports the new strategy?
2. Has the company recently changed its sales strategy? If yes, has the sales compensation plan been reviewed to determine if it supports the new strategy?
3. Has the company been experiencing rapid growth in business volume and/or employment? If yes,
   • Do you feel satisfied that your pay programs provide sufficiently motivating rewards for the achievement of company business objectives?
   • Has the pay plan been flexible and competitive enough to attract and retain employees
   • Are there fair differentials in pay for current employees when compared with the pay offers to new hires?
   • Do you feel comfortable that there are good compensation systems to assure employees are paid in a fair manner relative to their responsibilities, performance, and overall contribution?
4. Has there been problems with recruitment or retention of employees and executive management due to inadequate employee compensation or financial rewards?
5. Has compensation been properly tied to individual, team and company performance factors?
6. Are you comfortable that supervisors and managers are doing a good job of setting employee performance standards, measuring performance and rewarding performance? If not,
   • Is supervisory training in performance appraisal offered regularly?
   • Does the performance appraisal form focus on performance standards and/or objectives which are specific to each job?
   • Are there sufficient variances in reward between employees whose performance exceeds expectations vs. meets expectations vs. fails to meet expectations?
7. Are you satisfied with the information that you have about competitor compensation and benefit practices? Are you interested in locating additional sources of survey information and/or conducting a custom survey?
8. Have you audited your compensation practices for compliance with state wage orders, state employment discrimination laws, FLSA and EEO (Title VII, Equal Pay Act, etc.) statutes in the last few years?
9. Does employee salary and bonus reflect changes in job duties as they evolve?

Personnel Systems Associates can assist you in a thorough audit of all employee compensation policies and practices, development of compensation strategy, and development of improved salary, bonus, incentive, profit sharing, and stock option programs. Such an audit would include detailed questions related to each of the above issues and would typically include inspection of compensation related documents, compensation policies, computer analysis of payroll and personnel records, and interviews with key management personnel.