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

Narrowing and Validating the Grey Zone

The Grey Zone has many meanings. I would like to refer to the grey area where organizational jobs/positions are not obviously exempt or non-exempt from hourly overtime pay. From the smallest mom and pop to the very large fortune 500 companies, each organization must determine the Exempt/Non-Exempt status for all positions to comply with Department of Labor regulations. Narrowing and validating the number of position located in the GREY ZONE is becoming more critical for Human Resources and Compensation professionals. Organizations/Companies are at risk for monetary overtime pay, taxes and related penalties for not properly identifying and placing positions in the correct exempt or non-exempt status.

We have heard from our clients that the Department of Labor’s efforts to hire, train and release additional labor investigators are having an impact on the number of organizations that are being investigated for the first time. The DOL investigators are focusing on the exempt and non-exempt job title designations and evaluation of independent contractors. Of course, the Department of Labor is looking for overtime tax dollars associated with improper designations. Based on recent DOL web page postings, the number of successful investigations and subsequent fines are increasing dramatically compared to past historical trends.

Human Resources and Compensation professionals are encouraged to reevaluate positions in the Grey Zone and to utilize internal job evaluation systems or programs that validate exempt and non-exempt designation with compensable factors and descriptions.

We recommend an objective 15 factors job evaluation system that will help narrow and validate the positions located in the grey zone. The job rating chart located on the following page helps to illustrate this process of utilizing fifteen objective compensable factors on all jobs within the organization. For the purposes of this illustration, the positions in the grey zone have been highlighted in yellow caution?? The Department of Labor exemption tests are applied to the positions in the grey zone and the positions outside of the grey zone are validated with the compensable factored points. Outside of newer DOL regulations regarding sales positions, loan officers and information technology positions, we have found the grey zone typically to be 550 to 750 points range and for some organizations this range can tighten down to 600 to 700 points. The use of an internal proven job rating system in a fair and consistent manner helps to 1) ensure greater confidence when determining exempt and non-exempt status designations, 2) express to employees and external DOL investigators that the organization is diligent and systematic with internal job evaluations and 3) create an internal job classification structure and pay system that can be compared with external market pay benchmarks and 4) mitigate risks for DOL overtime exemption investigations and monetary damages.

What Is DBConsulting?

At DBSquared we like to remind clients that our solutions are designed specifically for you, by HR professionals for HR professionals.  At this time of the year when every tax consultant I run into can only lament the loss of their personal time between now and April 15th, I am reminded that we also can say that our flagship solution, DBCompensation™ was designed by consultants for consultants.

A little bit of history is probably worthwhile.  The original methodology was developed by our founder in the mid 80s to help him be a better compensation consultant to public and private clients.  His sons enhanced and improved the methodology to help them address new developments in job classifications and compliance.  The computer application was originally designed to enable their consultancy to be more efficient.  We only decided to commercialize it when our clients began clamoring for it.

We are reminded of why we became consultants.  We were attracted by:

  • The opportunity to bring a continually improving, process-driven approach to your craft
  • The desire to bring best practices from one client to another, while leveraging your industry depth or functional expertise
  • The freedom to “do the right thing by the client”, secure in the knowledge that “the rest will follow”, when you make solving the client’s problem your priority?

Look at almost any consultancy discipline and you will find an explosion of tools, some commercial and some home grown.  At DBSquared we have been fortunate to have our clients see the value in our tools.  As consultants we still have the opportunity to improve our expertise and ability to help clients.  We didn’t cede that advantage or opportunity.  In fact we would argue that the increase in accuracy, reliability and risk mitigation is alone worth our investment of time and expertise.  Our consulting business has increased even as we sell our solution to clients.

We would encourage any compensation consultant to explore making our solution part of their own tool chest.  It won’t mean you will have less opportunity.  But it could mean the difference between offering your clients the most effective service in the most efficient manner, and having a little time left over for yourself.

 

 

DBConsultation is available to assist you in the development of your Total Rewards Philosophy and the various base, bonus, short-term and long-term incentive plans and benefit programs. The total package should motivate employees to perform at levels that provide your organization with a competitive advantage over other organizations as you seek to fulfill the strategic plan. Contact us today for your successful tomorrow.