The Effect of Expensing Employee Bonus on Employee Compensation and Reward Systems

• Main Authors: Lien-Fang Su, 蘇連芳
• Other Authors: 丘邦翰
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/73086020377370018082

碩士 === 元智大學 === 管理研究所 === 97 === In Taiwan’s economic development, “employee bonus” and “employee stock ownership” systems have been highly influential to the development of high-tech industries. In the past employee bonus system, enterprises would allocate distributable earnings in cash or share to their employees at the end of each year. However, the bonus system based on allocating earnings in share to employees could not clearly reflect the personnel cost, thus resulting in an inflation of earnings. The financial statements could not be realistically reflected. In order to distribute earnings in share to employees continuously, enterprises needed to capitalize retained earnings every year. In a few years, their capitals would be gradually diluted. Once their earnings growth rate began to fall behind their capital inflation rate, serious dilution of shareholder equities would occur and cause controversy. Besides, the domestic accounting method adopted to cope with such problem was also against the international guidelines on accounting, so it was constantly criticized by overseas financial institutions. To make domestic accounting principles compatible with international guidelines and increase the transparency of financial statements, the Department of Economic Affairs of our government issued an ordinance demanding that, starting from Jan 1, 2008, all enterprises shall expense all employee bonuses and recognize shares distributed to employees as an expense of the company by market price. The reports and discussions on this policy in the last year have been mostly focused on the aspects of accounting, taxing, and dilution of equities. The most important aspect, shrinkage of employee benefits and its impact on employee retention, has been neglected. In this study, secondary data were used. Through economical research methods, historical research method, and case study method, this study investigated how enterprises can make an effective allocation of limited resources under the “expensing employee bonus” policy to develop a pluralistic employee compensation and reward system, which includes mechanisms such as salary raise, issuance of employee stock option, implementation of treasury stock, constrained distribution of shares, and employee stock ownership trust, to lower the impact of this policy and further avoid slump of their stock price and loss of employees.