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.

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

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!