2019: Pay Me (Too) Now!

Over the past few years, there has been a lot of good pressure regarding pay equity in the workplace. Though the recent #MeToo main emphasis has been the increased exposure of sexual harassment in the work sites around the county, it has also reenergized the pay gap between men and women. This pay gap will be addressed later in this article, but there is finally a recognizable increase in wages around the U.S. and 2019 average increase in wage budgets is projected to be around 3.2%. Wage increases tend to lag the economy and we have had a couple of solid performing years, thus organizations have been using some of their cash reserves to invest in their infrastructure including capital and human improvements. The economy recovery started in the mid-2009 (however slow going until 2016) and the average annual wage increase for private employees for the last eight years has averaged 2.8% as mentioned in an Economic Policy Institute October, 2018 report. However, the 3.2% is a notable event as wages have been fairly stagnant for several years. There are some other recent developments that have occurred which will create additional pressure by companies to increase their starting wages. These include:

1. Walmart increased their starting wage in their stores to $11.00
back in January, 2018. Target has committed to increase their
starting wage to $15.00 by 2020.

2. Big financial and insurance companies like Wells Fargo,
J.P. Morgan and Aetna increased their starting wage to
$16.00/$16.50 back in 2015/2016.

3. Amazon increased their starting wage to $15.00 this past month.

4. There are more organizations researching the living wage structure
for the minimum pay level jobs. This website provides living wage
structure in 13 different living units categories from one adult to
two adults and three children by state and then by county. The
organization mentioned that the average living wage jumped
between 4 to 6% in 2017. http://livingwage.mit.edu/

5. Many states are passing minimum wage laws that will drive up
starting wages. For example, Arkansas’ new minimum will be
$9.25 per hour starting January 1, 2019, then $10.00 per hour
in January 1, 2020 and $11.00 per hour in January 1, 2021. For
Missouri, their current minimum of $7.85 per hour will be raised
to $8.60 per hour January 1, 2019, then increase by $0.85 per
hour each following January until 2023 when it will be $12.00
per hour.

Gender Gap
Based on a variety of articles, there is still about a 20% gender gap between male and female pay levels. Annie Nova wrote an article titled “Make the #MeToo moment your chance for a raise” in February, 2018. She mentioned, “As the conversation about sexual harassment gets louder, women are also bringing up the pay gap to their bosses, according to experts.” The rest of Annie’s article provides advice on how a female can navigate her way to a salary increase in the #MeToo Moment. Her two main steps are “Push for your value to be seen” and “Prepare to ask.”

Given our work with numerous clients from all types of industries over the past 30 plus years, there is a genuine desire and commitment to eliminate any justified pay equity issues and there is also an effort to ensure employees are paid a competitive salary or higher based on performance and time in the position. The Department of Labor (DOL) and the Equal Employment Opportunity Commission (EEOC) are making every effort to find organizations that are intentionally discriminating regarding pay from a gender, ethnic background, age, disability, etc. basis and the back pay, penalties, and fines are significant.

Since 1985, our firm has offered its own copyrighted 15-factor job valuing/rating system. This system evaluates a job against various factors including general experience, management experience, education, machine operations, revenue and/or expense savings generation, etc. and ends up with a point value for a position. An overall point total is established for each position and the base salary for all the employees in each position to calculate an internal pay line or regression line. This allows an organization to use an objective and defensible approach to determine if it has any internal pay equity issues as well as being able to classify positions in similar or dissimilar situated groupings of position titles. We have been able to assist our clients to identify and set in motion steps to correct any pay equity problems.

Millennials and forward Generations Pay/Benefits
Randy Barrett published a thought-provoking article for Employee Benefit News last year titled, “Why the most innovated employers are rethinking total compensation.” Randy said that the millennials are the drivers for this change and the employers are responding. Beyond a competitive base salary, Randy mentioned that the millennials want work/life balance and a socially conscious corporate culture. Below are two key paragraphs from his article.

“Leading innovators, including Akamai, Rackspace, Southwest Airlines and Vivint, are focusing on “quality of life” perks and other benefits that our grandfathers wouldn’t have dreamed of — or thought possible. They include daycare assistance, adoption and fertility funding, onsite medical scans, ID-theft services and enhanced options for working remotely.”

“Benefits, or what we refer to as WorkPerks at Southwest, are a big driver when it comes to attracting, retaining and engaging [employees],” says Julie Weber, VP of people at Southwest Airlines. She adds that the company “doesn’t just focus on traditional benefits like wellness, healthcare and retirement.” “For the airline, that means a positive work culture, career development and generous travel privileges.“

Millennials and later generations are likely to jump ship if they don’t see the above perks as well as career advancement opportunities, challenging work, an open and genuine relationship with supervisor/manager, learning new skills opportunities and performance-based retention compensation.

One of the best retention compensation tools for millennials that we have seen is having a performance-based year-end non-contributory retirement supplement amount (roughly 10% to 15% of base salary) that has a vesting requirement of at least five years that causes high performers to stick around and get past the itch to move tendency.

Another trend we are seeing for millennials is some employers are paying for additional college degrees and/or professional licenses/certifications including MBAs, Project Management Professional (PMP) certification, CPA license, etc.

Baby Boomer Pay/Benefits
With life expectancy being into the mid to late 80’s, many of the baby boomers (BBs) are still working past 65 and this trend will continue for at least the next decade. BBs are looking for ways that they can continue to work to around age 70 to maximize their social security dollars, hold onto good health benefits through their employers until they retire, and take more time off with less pay to be in a semi-retired status so they can spend time with the grandchildren.

BBs can be great mentors to the Gen Xers, Gen Yers (Millennials) and the Gen Zers, the newest workforce members. Most of the BBs are well educated, trained and started working in the mid-60s. They tend to have a balanced outlook on life, worked hard for many years with a few employers and can assist with filling in any non-technical skills gaps that the younger generations haven’t mastered or been exposed to up to now.

Given the pay gap between seasoned BBs and new employees entering the workforce, employers are being creative with easing out the BBs and avoiding any age discrimination issues as well as being able to transfer any intellectual knowledge to new employees. Having a well thought-out succession plan creates a win-win for both the employer and the BBs.

Fixed Pay vs. Variable Pay
The younger generations are open for variable pay as long as the base salary is reasonable and the performance factors tied to the variable or incentive pay are challenging, but achievable. We have worked with several clients over the past few years implementing incentive compensation plans for salaried and hourly positions using a threshold to target maximum pay out with three to six performance-based targets and bonuses starting at 5% of base salary for hourly positions to as high as 50% of base salary for C-Suite positions. New or revised targets are established at the beginning of each calendar or fiscal year and bonuses can be paid in cash or stocks. Variable pay allows an organization to use more at-risk dollars and lowers the amount of fixed pay dollars from a cash flow standpoint.

Key Employee Retention
As more of the BBs are retiring, there is a need to retain key employees that will be the new leaders to take the organization forward over the next 10 to 20 years. To ensure key employees will stay, many companies are offering deferred compensation plans, split dollar insurance and/or restrictive stock grants to lock in the future leaders. These forms of long-term compensation place funds in accounts that would leave a significant amount of dollars that would be forfeited if a key employee leaves for another position.

 

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

All Time High For Job Openings and Number of New Hires

The Department of Labor Bureau of Statistics published August, 2018 job openings and labor turnover rates in its October 16th news release.  The number of job openings reached a series high of 7.1 million on the last business day in August and the number of new hires in August reached a series high of 5.8 million.  Based on the October 16th news release, “Over the 12 months ending in August, new hires totaled 67.0 million and separations totaled 64.7 million, yielding a net employment gain of 2.4 million.”

Several studies on employee loyalty, engagement and turnover have been completed during the last several years of improved national economic conditions.  A recent study published by the West Monroe consulting firm confirms that most employees (82%) are loyal to their current employer but 59% would leave their current employer for the right opportunity. The West Monroe article continues with a discussion about the importance of internal employee career development as a means to mitigate the allure of external “right opportunities” that create employee turnover.  West Monroe is a consulting firm with 1,000 business and technology consultants located in nine U.S. based offices.

Based on our experience with private and public clients during the recent period of current positive economic conditions, we would recommend focusing on the following employee-centered initiatives:

  • Competitive and equitable base pay for all employees;
  • Incentive pay for top performing teams and employees;
  • Internal employee development and alignment of skills with team and company goals;
  • Use company sponsored benefits as a strategic tool for attracting and retaining employees;
  • Build a culture that fosters “relational social glue” to mitigate external “greener grass” offers;
  • Promote and nurture employee ownership discernment and performance; and
  • Cultivate diversity and advance values of respect, personal integrity, and servant leadership.

 

 

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

U.S. Department of Labor Recovers More Than $2.9 Million To Resolve Alleged Pay Discrimination Violations at Dell EMC

PRESS RELEASE
5-14-18

SAN FRANCISCO, CA – The U.S. Department of Labor has reached a settlement with Dell EMC that requires the company to pay more than $2.9 million in back wages to remedy alleged pay discrimination violations at four Dell EMC locations in California and North Carolina. Headquartered in Hopkinton, Massachusetts, Dell EMC is a federal contractor providing computing, networking, and data storage solutions.

The settlement follows routine compliance evaluations by the Department’s Office of Federal Contract Compliance Programs (OFCCP) that found, beginning in 2014, Dell EMC systemically discriminated against females in engineering, marketing, and sales roles at its Pleasanton, California, facility and females in engineering and manufacturing roles at its Santa Clara, California, facility. OFCCP investigators found that the company paid women and African Americans in engineering roles at its Durham, North Carolina, facility less than white males. Investigators also found that the company paid African American females in manufacturing roles in Apex, North Carolina, less than white males.

“The Department of Labor appreciates Dell EMC’s cooperation to resolve these issues,” said OFCCP National Director Ondray Harris. “Together, we will ensure that the company complies with equal employment opportunity laws in its compensation practices.”

In its conciliation agreement with OFCCP, Dell EMC denies liability but will pay more than $2.9 million in back pay and interest to the affected class members. The company will also make pay adjustments, and take steps to ensure its pay practices meet legal requirements.

In addition to Executive Order 11246, OFCCP enforces Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974. These laws, as amended, make it illegal for contractors and subcontractors doing business with the federal government to discriminate in employment because of race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or status as a protected veteran. In addition, contractors and subcontractors are prohibited from discriminating against applicants or employees because they have inquired about, discussed, or disclosed their compensation or the compensation of others subject to certain limitations. For more information, please call OFCCP’s toll-free helpline at 800-397-6251 or visit https://www.dol.gov/ofccp/.

 

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

University of Denver to Pay $2.66 Million and Increase Salaries to Settle EEOC Equal Pay Lawsuit

PRESS RELEASE
6-1-18

Female Full Professors at the University’s Sturm College of Law Were Paid Average of Nearly $20,000 Less Than Their Male Counterparts, Federal Agency Charged

DENVER – The University of Denver will pay $2.66 million and furnish other relief to settle a pay discrimination lawsuit brought by the U.S. Equal Employment Opportunity Commission (EEOC), the federal agency announced today.

The EEOC’s lawsuit charged that the university violated federal law by paying a class of female full professors at the Sturm College of Law lower salaries than it paid to their male counterparts who were performing substantially equal work under similar working conditions.

According to the EEOC’s lawsuit, as of October 2013, salaries of female full professors were on average, $19,781 less than those of male full professors, and all the women’s salaries were below the average salary paid to men. Despite formally recognizing the significant pay disparity in a 2013 memo, the university declined to take corrective action by adjusting salaries of female full professors.

Such alleged conduct violates the Equal Pay Act of 1963 and Title VII of the Civil Rights of 1964, which both prohibit discrimination in compensation based on sex. The EEOC filed its lawsuit, EEOC et al. v. University of Denver, Case No. 1:16-cv-02471-WYD-MJW, in 2016 in U.S. District Court for the District of Colorado, after first attempting to reach a pre-litigation settlement through its conciliation process.

“The favorable resolution of this case is a clear example of the EEOC’s commitment to fully enforcing our federal laws against pay discrimination.  I hope cases like these get the attention of all employers and lead them to not only review their pay practices, but take action to address discrimination when they find it.” said EEOC Acting Chair, Victoria A. Lipnic.

In addition to $2.66 million in monetary damages to seven female full professors who participated in the lawsuit, the consent decree settling the suit also requires the University of Denver to increase the 2018 salaries of the seven female professors; annually publish salary and compensation information to tenure, tenure-track, and contract faculty; and employ a labor economist to conduct an annual compensa­tion equity study.

The university will also work with an independent consultant to review methods and criteria used to determine pay and compensation, and these standards used to determine raises each year will be announced to the faculty in advance of the academic year. The independent consultant will also assist the university to revise its anti-discrimination policies and to conduct an informational campaign and training on those anti-discrimination policies. The decree will remain in effect for six years, but may end a year early based on an established record of compliance. While the decree is in effect, the independent consul­tant will provide regular progress and compliance reports to both the EEOC and the University of Denver. The court approved the settlement and will retain jurisdiction while the decree is in effect.

Noting the importance of protecting civil rights, Senior District Judge Wiley Y. Daniel, who approved the consent decree, stated during the hearing: “We need to make sure we learn from our history and we understand the importance of moving forward, not backwards, moving forward, not sideways.”

“The Equal Pay Act and Title VII are clear that pay discrimination based on a person’s sex is a violation of federal law – no exceptions,” said EEOC Regional Attorney Mary Jo O’Neill. “As we just recently marked Equal Pay Day, the EEOC remains committed to elimination of pay discrimination in the workplace.”

Phoenix District Director Elizabeth Cadle said, “This resolution is an excellent result, not only for the seven women who will receive compensation and salary increases to address past pay inequities, but also for other faculty members who will benefit from increased pay transparency and an annual pay equity study targeted at preventing similar inequities from arising in the future.”

The University of Denver is a private research university in Denver made up of 13 undergraduate and graduate schools and colleges.

The EEOC’s Phoenix District Office has jurisdiction over Arizona, Colorado, New Mexico, Utah, and Wyoming.

The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination. More information is available at www.eeoc.gov.  Stay connected with the latest EEOC news by subscribing to our email updates.

 

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

A $2+ Million Price Tag Times Two

Pay Inequity/Pay Discrimination can cost an organization a significant sum of money as evidenced in the two following 2018 press release articles, one from the EEOC and the other from the OFCCP.

Johanson Group, an HR/Compensation consulting company has assisted at least a thousand plus clients since 1973 with the review of their employees’ compensation practices including steps to correct pay discrimination issues.  Its sister company, DB Squared, was established in 2005 using the Johanson’s copyrighted 15-factor job rating system methodology and automating its Job Evaluation and Salary Administration Program (JESAP) so that organizations could internalize their compensation program and be able to identify their own pay equity issues.  Both companies are here to support and assist companies by using a proactive approach to avoid being the spotlight in a negative and costly manner.

 

PRESS RELEASE
6-1-18

University of Denver to Pay $2.66 Million and Increase Salaries to Settle EEOC Equal Pay Lawsuit

Female Full Professors at the University’s Sturm College of Law Were Paid Average of Nearly $20,000 Less Than Their Male Counterparts, Federal Agency Charged

DENVER – The University of Denver will pay $2.66 million and furnish other relief to settle a pay discrimination lawsuit brought by the U.S. Equal Employment Opportunity Commission (EEOC), the federal agency announced today.

The EEOC’s lawsuit charged that the university violated federal law by paying a class of female full professors at the Sturm College of Law lower salaries than it paid to their male counterparts who were performing substantially equal work under similar working conditions. (continue reading……)

 

PRESS RELEASE
5-14-18

U.S. Department of Labor Recovers More Than $2.9 Million To Resolve Alleged Pay Discrimination Violations at Dell EMC

SAN FRANCISCO, CA – The U.S. Department of Labor has reached a settlement with Dell EMC that requires the company to pay more than $2.9 million in back wages to remedy alleged pay discrimination violations at four Dell EMC locations in California and North Carolina. Headquartered in Hopkinton, Massachusetts, Dell EMC is a federal contractor providing computing, networking, and data storage solutions. (continue reading….)

 

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

How Are Organizations Utilizing Retiring Baby Boomers’ Compensation?

How Are Organizations Utilizing Retiring Baby Boomers’ Compensation?

One of our public clients has experienced 17% turnover during the first eight months of 2018. The average tenure of the employees leaving this organization is almost 5.5 years and a measurable group of these employees are retiring baby boomers.

The average pay variance between the new hires and terminated employees for the above mentioned client is 16.7% or about $6,365 dollars per employee. With the impact of daily baby boomer retirements, we estimate that organizations will have between 10% and 25% in total compensation dollars to reallocate within their annual employee compensation budgets.

For small to large organizations, the amount of freed-up dollars associated with baby boomer terminations due to retirements can be significant and useful for taking care of high priority compensation needs. Some of these needs will include new hire replacements, funding variable pay incentive plans, addressing pay compression and pay inequity issues, bonus pay for top performers and a variety of other pay initiatives.

For organizations with remaining baby boomers that will retire in the next three to five years, how will you plan to use their 4th quartile base pay salaries to fund other compensation needs?

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

Creating a Competitive Advantage through Pay Equity

Creating a Competitive Advantage through Pay Equity

Every organization should be in business for a particular purpose.  DB Squared’s main purpose is to provide HR technology tools to improve efficiency, effectiveness and positive outcomes in the compensation arena.  Johanson Group, sister company to DBSquared, provides compensation and strategic planning consulting to its clients around the U.S.  Recently, we have taken several of our clients through a competitive advantage exercise to determine what their core strengths are and how to use them to maintain and grow their competitive advantage for five to ten years in the future.

When an organization can show that their pay practices and policies are equitable and consistent with no difference to gender, ethnic background or age, a competitive advantage will exist as there is still a pay differential for women and minorities in the workplace around the U.S.  If you are not sure about your pay equity status, we can assess and implement a compensation program that provides your organization with one more competitive advantage and will increase the level of employee satisfaction and transparency.

 

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

HAPPY POST 4TH of JULY

HAPPY POST 4TH of JULY

Now that we’re on the backside of the celebratory 4th of July – Independence Day fireworks and picnics, it is time to get back to work with attracting and retaining employees through competitive pay and strategic total rewards benefits. During the recent 4th of July holiday, it was amazing to see how small compacted fireworks create such spectacular nighttime displays of colorful sparks. When lit, these small containers in relative size compared to the resulting expansive firework displays are a profound mystery of awe and yet a technological mastery of increasing proportion. The chemistry of fireworks is based on the theory of combustion, but a simple observation could be made based on the theory of compression.

Speaking of compression, many of our compensation clients are experiencing pay compression issues. With tighter labor markets and increasing starting wages for new hires, the pay levels between newly hired employees and employees with one to three years of tenure are getting tighter. The compression of the air-fuel mixture in an internal-combustion engine just before ignition creates powerful energy. The employee energy associated from pay compression issues can be significant until the employer resolves these issues. Identification of pay compression starts the process towards releasing the valve on negative pay comments and the potential of losing tenure employees. Employers without internal pay structures/plans will use a “time in position” percentage of market pay means to determine pay adjustments for employees expressing pay compression concerns with newly hired employees. Employers with internal pay structures/plans that are competitive with market pay means by position will use a “time in position” percentage of the internal job grade pay range midpoint for pay movement decisions that lessen pay compression problems.

The average timeframe for an employee to reach their respective position pay range midpoint is a key factor when addressing pay compression in an organization. The private sector employees on the average tend to reach their pay range midpoints within 4 to 5 years. The public sector employees on the average will reach their pay range midpoints in 8 to 10 years depending on the average annual pay percentage increases of 3 to 4% of base pay. Also, the pay range spread will be another key component in determining how quickly employees will reach position pay range midpoints.

Let’s hope that your internal pay compression situation can be resolved with firework “Sparklers” instead of huge sky-filling firework displays with M-80 sonic booms!

Happy Post 4th of July Boom!

 

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

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/.