Benefits of a Current Classification and Compensation Plan

We recently completed a classification and compensation study for a public organization where the last formal study was done over 20 years ago.  With this much time between formal classification and compensation studies, the normal outlook would be that the organization’s classifications and compensation plans would be dated and needing a complete overhaul.  We were pleased to find that the Human Resources Director and HR Administrator had worked diligently to keep the organization’s job classifications current with ongoing internal reviews and updates.  In addition, the organization’s compensation plans were evaluated and updated with semi-annual external market pay studies. 

We were able to affirm and align the organization’s classifications and compensation plans based on our internal and external assessments and address dated policies and slightly inconsistent grade and range structures.  This organization did not suffer a classification and compensation plans earthquake or sticker shock from the new study because of the ongoing internal and external work performed by the Human Resources Director and HR Administrator.  There are several benefits derived from maintaining a current classification and compensation plan. Some of those benefits are listed below.

  • Ongoing alignment of job classifications and compensation pay grade placements
  • Internal job and pay equity and external pay competitiveness
  • Consistency with compensation planning and budgeting per fiscal year
  • Earthquake and sticker shock prevention from new classification and compensation findings
  • Linear classification and compensation plans and less pocketed or over-utilized pay grades
  • Greater transparency and consistency with job assignment and pay expectations
  • Ability to hire and retain competent and skilled talent for the organization

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

Taking Advantage of the Reset

We hope everyone that we have served over the past 35 years is safe and well and doing everything they can to protect themselves and others around them from the Covid-19 virus.  We have been able to take care of our clients’ needs during this time but are looking forward to the day we can all be in closer contact with our business associates, clients, family, and friends.

It has been our honor and joy to provide our copyrighted 15-factor Job Evaluation and Salary Administration Program (1985) in an automated format known as DBCompensation since 2005.  In addition, we have several clients using the DBDescriptions software program that was developed and offered starting in 2010.

In the coming weeks and months, many businesses that have been shut down or had to limit their business due to the pandemic will be returning to some level of operations in the coming weeks with the intent to be at full operation over the next few months.  We believe this is a great time to assess your compensation and benefits plans with the intent to ensure fair, equitable and competitive total reward packages are in place. 

If you aren’t sure or you desire a more formalized structure that we have implemented since 1985 and offered commercially in an automated format since 2005, please contact us.  Management and owners love the consistency, detail, defensibility and a realistic road map to follow.  Employees love the company’s commitment to create an equitable, competitive and growth potential structure.

 

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

2020 “Living Wage” and “Minimum Wage” Intersection or Roundabout?

An intersection is a point at which two or more things intersect, especially roads. (Merriam-Webster)

A roundabout (also called a traffic circle, road circle, rotary, rotunda or island) is a type of circular intersection or junction in which road traffic is permitted to flow in one direction around a central island, and priority is typically given to traffic already in the junction. (Wikipedia)

After the nation is able to heal from the Coronavirus crisis and the corresponding forced economic recession to save human lives, government officials and employers will be working to bring our nation’s workforce back to pre-recession productivity levels and employees will be pushing hard to reestablish their previous compensation and benefit packages.

Compensation and HR professionals are keeping their eyes on two and maybe more things that are intersecting or circling and will have an impact on future compensation levels for the lowest paid jobs in our country.  Living wage discussions and new state minimum wage laws are raising compensation levels above the current Federal minimum wage rate of $7.25 for non-exempt positions.

Will Living Wage rates (Reference: M.I.T. Living Wage Rate Calculator) be given a right-of-way status at a four way intersection with state minimum wage laws, proposed Federal minimum wage rates from forthcoming legislation to gen up our post-recession economy and/or demand greater than supply job economic factors.  Using a roundabout circular intersection, which of the four mentioned items will take a priority lead position on compensation minimum wage policy decisions?

In our compensation consulting work with municipalities, we are seeing more requests by city council members for higher minimum wages or living wages for the lowest paid positions and employees that fill these jobs.

The next time you roll-up to a four-way stop intersection or press the gas pedal to enter a circular roundabout, we want you to think about the lowest paid employees and how they make a living and cover basic shelter and food expenses with $7.25 to $13.00 minimum hourly wage rates.

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

Exodus of Baby Boomers Helping to Fund Higher Employee Pay Adjustments

In a Forbes article titled, Baby Boomers Retiring Rapidly: Are Successors Prepared written by Maureen Metcalf, Forbes Council Member and CEO of Metcalf & Associates, she refers to research by Bonnie Hagemann and co-authors in their book “Leading with Vision” that baby boomers are leaving the workforce at a rapid rate of 10,000 per day or approximately 1 baby boomer every 9 seconds.

In our compensation consulting work, we’re seeing this phenomenon unfolding with our private and public sector clients.  We have a public government client that experienced an average $3.75 hourly pay difference between leaving employees’ average pay and their new hires’ average pay in 2018, and they are on-track for a $2.44 difference in 2019.  This may not seem like much money but it equates to $640,000 annual wage savings in 2018 and approximately $724,000 savings in 2019 based on a 15% turnover rate.

Some clients are redistributing these baby boomer exodus wage savings to help fund higher annual employee pay adjustments.  The 2019 annual WorldatWork Compensation study is projecting a national average of 3.3% for employee pay adjustments in 2020. The represents a new historical high after years of 3.0% or less average annual employee pay adjustments to base pay.

Human Resource and Compensation professionals need to help their management teams with strategic redistribution of baby boomer wage savings and succession planning during the next ten years.  The 3rd and 4th quartile wages will be out the door during the next decade and its recipients will be on the beach, traveling in an RV or parachuting out of a plane like past president George H.W. Bush did to celebrate his 90th birthday on June 12, 2014.

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

Salary Budget for 2020 and Other Important Compensation Facts

According to a recent article in Workspan Daily written by Brett Christie, staff writer at WorldatWork, the projected 2020 salary budget increase will be 3.3%.  Given that this comes to fruition, it will be the third year in a row that we have seen an increase: 2017 – 3.0%, 2018 – 3.1%, 2019 – 3.2% and 2020 – 3.3%.Some other interesting compensation-related facts from the WorldatWork’s 46th “Salary Budget Survey” that Brett mentioned in his article include the following:Merit Budgets: 2019 average was 2.9% with a projected 3.0% for 2020Promotional Increases: Average grew to 8.9%Salary Structure Adjustments: 2019 average was 2.2%, up from 2018 of 2.0% and a projected 2.1% for 2020We are moving into the late summer and many of our clients are already starting their compensation reviews and formulating their budget plan for 2020.   The above information can be useful data as we all prepare for 2020.Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

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/.

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/

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

Strategic Total Compensation Packages

Strategic Total Compensation Packages

Our compensation management consulting includes working with private and public organizations. The public organizations include cities, counties, utilities, school districts, and libraries. Often, we hear the public organizations’ authority councils, quorum courts, and boards request the total compensation strategy of lagging the market pay average due to significant employer contributions made to the employees’ defined benefit retirement plans and in some instances higher cost-sharing percentages for employee health insurance premiums.

Private and public organizations need to evaluate their respective total compensation plans (wages and benefits) to become more strategic due to the increasing demand for employees with skills and competencies to help the organizations achieve current and future goals and services.

Most public organizations with defined benefits retirement plans are contributing double-digit percentages of employees’ base wages to these unfunded liability plans.  This benefit has greater value and meaning for existing employees with five or more years of service with the public employer.  For new employees entering the workforce, the defined retirement benefit may not attract skilled workers, competent professionals, and potential managers and leaders who have various options to join private employer businesses. The private businesses have the resources to offer higher initial wage/salary offerings, variable and bonus pay plans, defined contribution retirement plans with a profit sharing component and opportunities for greater income growth through internal position promotions and efforts to pay employees at the market pay mean within three to five years.

Total compensation packages are becoming more strategic and variable as demand for talented and skilled workers exceeds the supply.  We encourage both private and public employers to stay competitive with their employee base wage/salary structures and benefit offerings.

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