Tuesday, April 24, 2012

Executive Compensation Limit for 2011

At long last, the Office of Management and Budget has published the executive compensation cap for 2011. The new cap is $763,029, a nearly $70,000 jump (10 percent) from the 2010 cap of $693,951. We do not know why the delay. It is about a year late, when compared to previous years. Its possible this large of an increase will reflect poorly on the current administration. It is a staggering amount. As one pundit put it: "Obviously the system for calculating the benchmark is flawed. There is absolutely no justification for executives to be getting ten percent pay raises when employee pay has stagnated and many have lost their jobs."

For 2011, this cap applies to the top five most highly compensated employees in management positions at each home office and each segment. For 2012, it applies to all employees under DoD, Coast Guard and NASA  contracts and the top five for all other Government contracts. That should confuse things at affected contractors. They will need dual rates, one set of indirect rates for DoD, Coast Guard, and NASA and another set for all other Government contracts.

This cap does not affect the amount of compensation that contractors may pay. It only affects the amount that the Government will reimburse. Compensation for the fiscal year means the total amount of wages, salaries, bonuses, restricted stock, deferred and performance incentive compensation, and other compensation for the year, whether paid, earned, or otherwise accruing, as recorded in the employer's cost accounting records.

Stay tuned. There's going to be congressional pressure to reduce these caps.

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