Why Annual Employee Pay Adjustments Aren’t Moving Up As Fast As Expected

Why Annual Employee Pay Adjustments Aren’t Moving Up As Fast As Expected

Over the past five plus years, the average salary budget adjustment for base salaries has hovered around three percent (3%).  Each year, several of the large compensation consulting companies will conduct annual surveys for their clients to determine what the average projected base salary budget adjustment will be for the next year.  For the last few years, it looked as though the average increase was going to be heading north of 3%, but in reality, that hasn’t happened.  We started wondering what is causing the adjustment to remain flat each year and we think we have determined one of the reasons.

The baby boomers aren’t retiring at age 65 and this is causing several organizations to continue to employ them at their higher salary levels compared to the younger generations with less time in their respective companies.  We believe that as more of the baby boomers finally retire, this will help to realign and shift salary dollars to the younger employees.  We should finally see annual salary budgets moving above 3% and without significant new salary dollars added to the annual payroll budget.

 

Learn more by visiting www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-ty/.

Even 60 Minutes Is In On It

Even 60 Minutes Is In On It

On a recent Sunday evening, the popular show 60 Minutes ran a segment on an important topic that is getting a lot of attention today and part of the Me Too movement. Human Resources professionals around the world have been working to correct this issue for several years. What was different and important to note in the 60 Minutes program, a CEO of a large corporation (over 30,000 employees) was his commitment to have the HR team audit this issue. After the audit was completed, the company spent $3 million the first year to correct the issue. What is the issue? Pay Gender Parity and also, more women in executive company roles. The 60 Minutes piece indicated that women are currently paid on average 20% less than males in the same positions and that the number of women in senior level positions at the large corporation being interviewed for 60 Minutes was only 20%.

As compensation professionals, we have worked with over a thousand companies in the past 32 years. Companies that have a formal compensation and benefits philosophy statement that has been developed and adopted by the Board of Directors and an executive team committed to accomplishing and adhering to that statement do a better job of pay and leadership parity among all classes of employees. A solid compensation and benefits philosophy statement will directly address pay and leadership parity. For pay and leadership inequity to be eliminated, the Board of Directors and top management must commit and follow through on pay and leadership parity decisions.

If you need assistance to determine where your organization stands with this issue, we are here to help evaluate and set the stage to correct any pay and leadership parity issues within your organization.

Learn more by visiting www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-ty/.

Equal Pay Day 2018

EQUAL PAY DAY 2018 Tuesday, April 10

Equal Pay Day is the approximate day the typical woman must work into the new year to make what the typical man made at the end of the previous year. Based on 2016 Census data, the 2018 wage gap between women and men is $.80 (cents).

Equal Pay Day was originated by the National Committee on Pay Equity (NCPE) in 1996 as a public awareness event to illustrate the gap between men’s and women’s wages.

Equal pay, comparable worth pay, pay equity and pay for “substantially similar” positions are gaining greater traction at the national and state levels. Federal and State laws are addressing the systemic recruitment, job valuing, and compensation management practices that perpetuate pay gaps between women and men and all employees regardless of their gender, race, ethnicity and age.

Even though the pay gender gap continues through numerous contributing factors, using a defensible and valid job valuing system will help organizations determine if certain positions are “substantially similar” as defined by several state laws that require equal pay for equal work. Proactive organizations that embrace the equal pay for equal work philosophy will utilize proven and new processes to foster equitable pay practices for all employees.

Johanson Consulting, dba Johanson Group, developed and has maintained a proprietary job valuing system for 33 years. This system was licensed to DB Squared in 2006 and it is embedded in the DBCompensation software so human resources and compensation professionals are able to automate the internal job valuing function for their organizations.

Learn more about creating and maintaining internally equitable and externally competitive pay plan structures/scales by visiting www.dbcompensation.com.

Useful Job Descriptions Pay Dividends

Alan G. Crone, Attorney with Crone Law Firm, PLC wrote an article in the HR Professionals March issue titled, “The Business Case for Compliance”.  Mr. Crone, with over 25 years of employment law, mentions in his article that he is often asked what lessons he has learned that HR Professionals can apply to lessen or mitigate employment lawsuit and litigation expenses.

Alan recognizes that employment law is complicated, ever-changing and hard to manage with employee and employer value differences.  He states in the article, “There are no simple solutions, however I do suggest three simple strategies as a great start, that if you follow them you will reduce the number of employment related claims, complaints and lawsuits:

  1. Draft and maintain hyper-accurate job descriptions;
  2. Communicate clearly the company’s expectation for employees and confront them when they do not live up to those expectations; and ,
  3. Refocus compliance efforts as training rather than as discipline.”

This article continues with Mr. Crone going into more detail on how these simple strategies can be applied with good common business sense and thorough application.  As human resources professionals for our respective employers, what are the dividends we can expect by implementing a useful job descriptions strategy as noted in Alan Crone’s article.

  • More informed candidates
  • Improved staffing and compensation decisions
  • Accurate and current job descriptions
  • Positive impact in management decisions
  • Greater defensibility
  • Compliance with ADA – reasonable accommodations
  • Compliance with FLSA – Exempt / Non-exempt (duties and responsibilities)

Mr. Crone completes the Job Descriptions section of his article with the following statement, “Top-notch job descriptions will create operational efficiencies, less lawsuits, better hiring decisions, more focused training and discipline, and less turnover.”

As human resources and compensation consultants and software providers, we support Mr. Crone’s advocacy for comprehensive, consistent and compliant job descriptions.  The time spent with bringing dated job descriptions to a current and accurate status will pay dividends for internal and external stakeholders.

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What are Your Compensation Strategies for 2018?

In the February 2018 issue of the HR Magazine, Stephen Miller authored an article titled “4 Compensation Trends for 2018.” He mentioned that salaries have been flat for years and listed four trends that will potentially impact pay strategies for 2018. They include Promoting Variable Pay, Improving – or Removing Performance Reviews, Adjusting to Salary History Bans (can’t ask candidates about their current or previous salary in some states and localities) and Preparing for Compliance Change and Challenges.

The one that caught our eye was the Adjusting to Salary History Bans and Stephen’s quote, “To comply with the bans, determine the value of each role and what will drive a higher or lower compensation package.” As past practicing HR professionals and HR consultants for over 30 years, we know it is difficult to determine the value of a position and what the appropriate pay level is for that position, especially if the position is unique to your organization or possibly is a hybrid of two or more positions. However, we’ve created a solution to the job valuing and market pay challenges many organizations are faced with today.

Johanson Group (family-owned since 1973) / DB Squared (since 2005) have automated the job valuing and salary administration program process. What used to take a huge amount of time and effort by the HR department, now takes hardly any time. This allows the organization to be more transparent as it relates to pay equity and comparable worth and also have a compliant and proactive approach to effective compensation management.

Our organizations are ready to assist at any level (compensation advice to turn-key implementation) to ensure that your compensation strategies for 2018 and beyond are accomplished and meeting your organization’s overall vision, mission and strategic initiatives.

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If you would like more information about how DB Squared can help you, click here: https://www.dbsquared.com/contact/

Fair and Competitive Base Pay

In the February issue of WorldatWork’s Workspan publication, Sandra McLellan and Laura Sejen with Willis Towers Watson authored an article titled, “Cracking the Case of Stagnant Wages”.  The authors make a compelling case for the reasons why employee base pay wages have been flat since the economic depression of 2008.  The authors provide sound reasoning why the annual employee performance evaluation and merit increase process is not an effective compensation management tool in today’s environment where work is more “event-driven” instead of annual performance focused.

McLellan and Sejen support the ongoing transition from annual performance evaluations that are laborious and disliked by employees and managers to more frequent employee check-ins that coincide with achieving impactful goals and position life cycle progression.

The authors recommend replacing the annual merit increase and annual performance review process with a commitment to “fair and fully competitive base pay,” where employees’ base pay increases will vary in size and frequency.

At Johanson Group and DB Squared, LLC, we encourage and support the authors’ advocacy for employers’ commitment to “fair and fully competitive base pay” and we have evangelized this compensation philosophy for over three decades.  A “fair and fully competitive base pay” is achievable with a proven internal job valuing system that is validated with external market pay comparisons. The combination of an internal and external compensation management system will provide the basis for equitable and competitive career life cycle position progressions that chart the way from entry-level positions to top decision-making positions that drive results for public and private organizations.

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If you would like more information about how DB Squared can help you, click here: https://www.dbsquared.com/contact/

Thankful!

We at DB Squared are thankful for our clients that have continued to use and provide suggestions for our current software programs DBCompensation and DBDescriptions. DBCompensation has been around since 2005 and the last update in January 2017 was the 10th and DBDescriptions has been updated several times based on client input. We maintain above a 90% retention rate and our clients tell us that they are very appreciative of the quick technical service and software education/how-to support.

For 2018, we would like to move DBCompensation from a Microsoft Access-based platform to SQL or some other program that would allow the software to accommodate larger employee populations and other data with increased speed. We continue to have requests to pull out the copyrighted Johanson Group job valuing/job rating portion of the program as an independent function and to develop a performance appraisal program tied to the job descriptions and essential duties for each job title within our client organizations.

As for DBDescriptions, we are considering adding another 400 to 900 pre-loaded job descriptions to the web-based program. This would increase the ‘ready-made’ job descriptions in DBDescriptions to 1500 or 2000. These ready-made descriptions can be modified or our clients can still start from scratch to build their job descriptions. We are also thinking about offering a Spanish conversion feature for an additional fee.

We wish all of our current clients a Happy and Festive Holiday Season and may 2018 be one of your best years.

Compensation Strategies for Millennials

We have partnered with Equias Alliance, a nonqualified benefits plans and BOLI company, on a few compensation projects and one of its principals, Ken Derks, wrote a recent excellent article titled, “Compensation Strategies to Attract, Retain and Motivate Millennials.”

One of his statements summarizes well where the millennials are financially.  “While millennials have essentially the same financial needs as the generations preceding them, their time horizon to retirement can be 30-plus years or more, which is too far into the future for them to focus on when faced with immediate financial planning decisions, like retiring student debt, purchasing a home and providing for their children’s education.” Ken offers a recommendation to meet the financial needs of the millennials by stating, “For the next generation of leaders, managements and boards should consider nonqualified benefit plans that allow for in-service distributions timed to coincide with events such as a child entering college or to pay off college debt.  Plan payments made to the participant while still employed can be made at some future point such as three, five or ten years.”

As companies are transitioning their work forces from the baby-boomers to the millennials, the importance of providing a competitive base salary coupled with performance-based incentive and retirement plans will help to attract, retain, and motivate the millennials and other generations to follow.

Johanson Group has worked with all types of companies and organizations for the past 44 years in the areas of compensation management, strategic planning, training and development, and management consulting.  We have taken our copyrighted job design and compensation methodologies and created software that is licensed through another company we own, DB Squared.   DBCompensation and DBDescriptions provide the front-end of the total rewards equation.  Please contact us to learn more about our consulting services and software products.  If you would like to contact one of our partner companies, Equias Alliance, their website is www.equiasalliance.com

Mind The Gap: A Guide To Talent Retention

We recently referenced a study from Manpower Group about job talent. The study was based on data from 1,300 respondents and the following key findings were identified.

  1.  Employers stated that applicants in general lacked the skills and experience required to successfully complete job duties and responsibilities for open positions.
  2.  Employees expected higher pay than the salaries offered by employers.
  3.  The top five consistently hardest  jobs to fill are:
  • Skilled Trades
  • Sales Representatives
  • Engineers
  • Drivers
  • Accounting and Finance Staff

There is a gap between employers and potential employees regarding the expected applicant skills and experience and expected compensation based on the Manpower Group Study.   Most likely, this is a resulting gap of talent depletion from employees leaving one employer for another that offers a better compensation package and career opportunities.

We conduct annual and/or bi-annual market studies and annual internal job and pay comparative analysis for our clients to reduce or eliminate employer and employee gaps with employee capabilities expectation, pay for performance and compensation expectations.

Back-filling position gaps resulting from higher levels of voluntary terminations through continuous recruitment and placement efforts is a very expensive tangible and intangible employment disposition.

Address your potential talent shortage and talent retention  gaps by implementing our proactive compensation management processes with DBSquared’s proven and very productive software called DBCompensation.  Our clients have gaps they can hurdle while employers utilizing reactive compensation management strategies have canyons to cross either by mule which is slow, or by helicopter which is efficiently expensive.

 

Why The Engineer&squo;s Approval is the Most Important

Our firm completed a few job classification and compensation study projects in Kentucky last year and one of the side entertainment venues was the Keeneland Race Track in Lexington. What a nice horse racing track and facility for guests traveling to the Lexington area from within U.S. and around the world to see these amazing animals and jockeys racing full speed to the finish line. While spending the day at Keeneland, it became pretty apparent the amount of precision and forethought that goes into all the systems and processes for a smooth operating race track facility. The display board computer and graphics, the betting system software and hardware requirements, the photo finish computer and systems, the beverage and food POS software and hardware configuration, the publishing systems to produce a daily race track program, and the HRIS system to manage human capital compensation and benefit programs. While the Keeneland Race Track was being developed, constructed and configured for its ultimate opening day and during its on-going operation, a team of engineers and information technology professionals used and continue to use their skills, training, knowledge and keen eyes to ensure no stone is left uncovered. This leads to consistent and efficient daily race track operations.

When we completed one of the job classification and compensation study projects for a public utility, the final step required approval by the utility board of commissioners. One of the commissioners is a mechanical engineer and his review of the proposed job classification and compensation study project was through the lens of a skilled and knowledgeable technical professional. His questions about the study internal job valuing and external market pay study processes were comprehensive and precise. It was his desire as a member of the commissioners’ team to test the processes and systems to determine its validity and value for the public utility organization. After answering several questions and having a good discussion about the job classification and compensation study project, the commissioner was satisfied and understood the Utility’s new job classification and compensation management system. It passed the engineer’s filter for comprehensiveness and precision.   We gained the Engineer’s approval and he was going to support passage of the new job classification and compensation study.

What are the components of a “state of the art” job classification and compensation management study project?

Comprehensive, consistent and compliant job descriptions developed in an automated electronic position analysis questionnaire database system with a collaboration feature.

Job descriptions and job rating systems that are integrated and aligned for efficient internal job valuing and placement within the organization structure.

Automated employee information uploading systems to minimize or eliminate data entry. Employee information that includes at minimum, ID #, Last Name, First Name, Job Title, Pay, Gender, Race/Ethnicity, Date of Birth, Date of Hire, EEO or Merit Rank, Department and Supervisor’s Title.

The ability to include external market pay data comparisons to evaluate internal pay competitiveness and validate the job valuing process for greater compensation management precision and defensibility.

Integrated and interactive system output tables, graphs, worksheets and reports for effective base compensation management structures and decisions that foster organization and employee behaviors and efforts that are aligned to meet objectives and goals.