Should the unemployment rate factor into reasonable compensation determinations?

BVWireIssue #99-2
December 8, 2010

On their BVR reasonable compensation webinar last week, Kevin Yeanoplos (Brueggeman and Johnson Yeanoplos) and Ed Rataj (CBIZ Human Capital Services) were hit with numerous audience questions, one of which was whether appraisers need to take the unemployment rate into their reasonable compensation analysis.  Rataj dissected the statistic and pointed out that despite the current high unemployment rate, salaries for higher level positions – and for professionals with at least a college degree – have actually increased over time.  The unemployment rate at these higher, managerial levels is more like 3-5% and therefore not a factor demanding much attention.  Yeanoplos articulated the paramount challenge to reasonable compensation efforts: “RMA is problematic, in fact, most of the data is problematic.  But we need to understand the problems in order to confidently bifurcate the number to distinguish between comp and ROI.”  For up-to-date guidance on reasonable compensation check BVR’s recently released Reasonable Compensation: Application and Analysis for Appraisal, Tax and Management Purposes by Yeanoplos and Ron Seigneur (Seigneur Gustafson).
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