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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Download our free HR Guide to a Compliant, Equitable & Competitive Compensation program on the right or click below to contact us for a free demo!

Compensation and Benefits Highlights from the 2017 Annual Surveys

Compensation and Benefits Highlights from
the 2017 Annual Surveys Completed by Johanson Group

 Employee pay adjustments for 2017 will average 3% and merit pay budgets will average between 3.1% and 3.4%.

  • The average employee base pay adjustments for 2018 will increase slightly due to increasing employment demand.
  • Employee average merit pay budgets in 2018 will range from 3.2% to 3.6% but employers are moving forward with increasing variable pay options.
  • National variable pay averages have increased to new levels as employers reward top performers.
  • Employers are beginning to utilize compensation and benefits strategically to attract and retain competent employees.
  • Above average retirement plan matching contributions by employers and profit sharing distributions are effective employee retention tools.
  • Employers will help employees with student loan debt through creative compensation and benefit packages.
  • Health insurance premium increases are partially mitigated by High Deductible Health Plan (HDHP) options with increasing deductibles and out of pocket maximums.
  • Employers are using HSA contributions to help new employees with minimal personal savings to be prepared for unexpected medical expenses.
  • Paid Time Off (PTO) plans are becoming more popular with employers over traditional sick and vacation time off plans.

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Download our free HR Guide to a Compliant, Equitable & Competitive Compensation program on the right or click below to contact us for a free demo!

Executive Compensation

Executive Compensation

Johanson Group’s normal approach to Executive Compensation is one of a long range approach that seeks to recruit, reward, retain and retire key personnel.  When we are working with executive management positions, we determine each base salary’s last five year average figure before retirement at 65 and then use 70% to 80% of these amounts as a basis for retirement planning.   We take these projected figures and subtract out any existing retirement plan funds (at retirement) such as 401(k), social security, etc. and the remaining balance is the amount that is used to create various types of retirement offerings to close the gap.  The following items are common to supplement an executive’s basic retirement plan:

Employee Stock Option Program (ESOP)
Bank Stock Granting
Stock Appreciation Rights or Performance Share Plan
Phantom Stock
Bank-Owned Life Insurance
Variable Life Insurance
Salary Continuation Plan (Pays a flat amount annually at retirement for “X” number of years)

The recruit portion includes a competitive base salary, health insurance, car allowance, club membership, paid time off for vacations, basic life insurance and other common benefits which most all other employees enjoy.

The reward piece typically involves a formalized incentive compensation plan where three to five stretching goals or metrics are established and bonus dollars are paid one to two months after the performance period.  The incentive compensation program that we like includes four payout levels: threshold, target, target plus, and target maximum.  The payout range of the CEO is roughly 30% to 50% of base salary, 25% to 40% of base salary for the CFO, COO and CLO, and 20% to 35% for the next layer of management.

The retain and retire aspects typically include a combination of the items above to close the gap between the 70% to 80% of final average pay and the current projected plan balances an executive would have through their 401(k) and social security.  If a Bank has publicly traded or internal stock, then stock options or stock appreciation rights can be provided to the executive.  If the stock is closely held, then phantom stock is an effective approach to provide an executive with the ability to realize the same return as the real stock.

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Download our free HR Guide to a Compliant, Equitable & Competitive Compensation program on the right or click below to contact us for a free demo!

New Comp Planning Software Launched for Mid-Size Companies

New Comp Planning Software Launched for Mid-Size Companies  

One of DB Squared’s partnering companies, , HRsoft – www.HRsoft.com – has developed a new software solution designed specifically for the needs of mid-size companies to plan how much to pay their employees.

Called Compensation Business Partner, this Cloud-based software manages four elements of pay, including:   market adjustments, merit increases, salary changes with promotions, and bonus awards.

The solution is pre-configured to support employers who want an efficient on-line way to plan compensation allocations when job classification, salary structure and budgets (DBSquared software DBCompensation develops these elements) have been formulated.   The new Cloud-based software guides the user through the entire employee pay adjustment planning process.

Companies gain efficiency with their salary budget by distributing salary budget funds in a way that meets their business needs.   Also, reports are available to review the data and for audit and control purposes.   Also, employees are paid and rewarded properly resulting in higher engagement and retention.

More information is available by contacting:   Ezra.Schneier@HRsoft.com    —    www.HRsoft.com

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Download our free HR Guide to a Compliant, Equitable & Competitive Compensation program on the right or click below to contact us for a free demo!

Get me to 100% like everyone else!

There is a funny, but realistic and soul-searching YouTube video titled “Only 78%?!”  The video starts out with a female employee learning that she is being paid 78% of her male peer’s pay in the same position.  Throughout the rest of the video, she only commits to 78% of her job responsibilities including work hours, meetings, project completions, etc.  The video is a great reminder that though the pay gap is shrinking between genders, there is still a gap that needs to be closed.  The new pay equity term on the street is “substantially similar” and there is a legal expectation that men and women should be paid comparable pay for work performed of the same value to the organization. Many times, it is difficult to determine what value a position is to the organization and what is the appropriate pay level for that position as well as what to pay each person in the position.  Our consulting firm developed a copyrighted 15-factor job rating/valuing system in the mid 80’s with the ability to create a point value for each position within an organization.  We have embedded the job valuing system in our DBCompensation software and the software creates a job description and a job point value within minutes.  The combination of the internal point value system and external pay data from a variety of pay aggregators allows an organization to establish a defensible and equitable pay range structure based on job content and external pay market data.  This eliminates the bias around gender, ethnic background, age, etc. and creates the “substantially similar” jobs in the same pay bands/ranges.  With this approach, an organization can ensure that everyone gets to 100% excluding time in position, performance and other valid differentials that cause pay differences among employees in the same position.

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Download our free HR Guide to a Compliant, Equitable & Competitive Compensation program on the right or click below to contact us for a free demo!

Effective Compensation Systems

Effective Compensation Systems

Mark Smith, CEO and Chief Research Officer with Ventana Research wrote a recent article titled, “Effective Compensation Systems Transform Human Capital Management” in his “Analyst Perspective” blog page.  Mark makes a case in his article for compensation management and its key role for organizations that want to engage and retain highly motivated and productive employees.

Mark states in the article, “Our experience and research in this field indicate that HR and corporate management obtain the greatest value from an approach that ties compensation to performance.”

Mark mentions that HRMS systems are evolving and the most progressive systems have greater flexibility with managing compensation options that go beyond the annual employee performance review and merit pay allocations.  For more information: marksmith.ventanaresearch.com

 

Learn more about DBSquared and HRsoft for compensation management solutions.

DBSquared is a nationally recognized company providing simplified HR technology that empowers our customers. We improve our customers’ return on investment by reducing employee turnover through the development of equitable and competitive base pay structures established with proven data-driven processes.  DBSquared’s SAAS solutions are continuously improving by way of recommendations from its customer users. Learn more at www.DBSquared.com

HRsoft supplies innovative Cloud-based compensation planning software solutions that automate the compensation planning process and workflow for employers.   These, in turn, help businesses enhance employee engagement and retention.   Scalable and supported by award-winning client service, HRsoft enables organizations to manage their compensation planning process in a centralized, secure system.   Discover more at:   http://www.HRsoft.com.

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Download our free HR Guide to a Compliant, Equitable & Competitive Compensation program on the right or click below to contact us for a free demo!