Essay Sample on Improving the Company's Compensation Policies

Who benefits from tax compensation?

Managers of the organizations have presently shown the failure when discussing the issues on how to raise bonus Gale (2016). While there is a tangible increase in the company's compensation, the overall figure of deduction of the payroll tax is said to have increased applied thus lowering the total cost of the company marginal rates. The article demonstrates a thorough overview of two outstanding possibilities whether the employees would be able to reduce the total cost of compensation through means such as additional tax saving patterns. In fact, the options do not give the tax savings to the employers. Instead, they spend relatively a large size to settle the cost of compensating the employees, which is indeed a critical factor in retaining and recruiting the over talents across the scope.

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In the in-depth look at the matter, the first option indicates the highest level of compensation for all the employees and shareholders. The first option puts into consideration the employees' compensation which is less costly and results to the increase in all the employees' dividend distribution. Additionally, it lowers the cost to a level lower than expected the deduction is deemed to reduce the cost than expected and thus to decrease the cost savings.

The second option considered is the consideration of the Domestic Production Activities Deduction (DPAD). It provides a deduction of 9% of the gross income generated from all the activities involved in the production process in the United States. A significant limitation is that it cannot exceed 50% of W-2 wages paid to the employees. Those businesses that have low employees compensation have the low level of employee's salary therefore increasing the cost of income.

What are the strengths and weaknesses?

The shareholder-employees of the best performing companies usually choose higher salaries from which the company collects the deductions. The option is preferred to the issue of dividends which have lower tax rates, but in turn, they do not provide the tax benefit to the cooperation. It is a bit tricky because sustaining the higher level of compensation is a costly exercise and thus the organization may not be able to maintain itself. Payment of the employees requires a reasonable consideration to ensure that all the dividends are substantiated.

What can we do to get help with this?

The Internal Revenue Code provides two essential guidelines for the employee deductions compensation applied by the employees Slemrod (2017). Therefore it is good to consider it as part of the resolution. The most substantial portion is that it postulates that the amount deductible must be deductible; it should not be done anyhow. Second must be up to the level of employee's income and proportional to the measure of their income. It is reasonable to declare that there is no employee would pay an employee any longer than their arm.

When is the best time to take action?

The best time to take action is now to ensure that there is a balance within the organization this is considered as the best opportunity for offset cost which is defined in the Internal Revenue Code.

Why is this relevant to me?

It is a right approach to improving the company's compensation policies and developing its close held association with the shareholders.

The different questions serve as clear guidelines for the proper way of improving the companies' service delivery and fairness in taxation. It is focused on the best mechanism of developing right merges of organization success. The company can suit and sustain favorable operations and maintain efficiency.

References

Gale, W. G., & Krupkin, A. (2016). Financing State and Local Pension Obligations: Issues and Options.

Retirement Security Project, Brookings Institute, Washington, DC.

Slemrod, J., & Bakija, J. (2017). Taxing ourselves: a citizen's guide to the debate over taxes. MIT Press.https://www.cpajournal.com/2018/01/31/hidden-tax-savings-raising-employee-compensation/