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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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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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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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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DBSquared & HRsoft Form a New Strategic Partnership

DBSquared and HRsoft Form a New Strategic Partnership to Help Employers Develop Data-Driven Solutions for Equitable Pay, Job Valuation and Compensation Compliance

Employers have growing needs in this area due to increased regulations from State and Federal government agencies addressing pay equity and fair pay.

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Fayetteville, Arkansas and Orlando, Florida  – DBSquared, an innovative supplier of solutions for employers to value positions and build pay structures for their companies using objective data and HRsoft, a leader in Software-as-a-Service (SaaS) compensation planning software, have announced a strategic partnership.

The partnership brings value to employers by using proven technology to address key processes and decision support needs relating to compensation.  A priority of employers is to re-evaluate their jobs based on objective criteria to determine if associates doing substantially similar work are paid equally.  Referred to as “comparable pay,” this is the main driver of growing regulations across the country.

Compliance with those regulations has become a hot topic among human resource professionals and senior executives.   A TV commercial by car manufacturer Audi aired during the 2017 Super Bowl highlighted the need for equal pay for men and women as its theme bringing further attention to the topic.

Blair Johanson, Principal of DBSquared, said:   “Employers use the DBSquared software and proprietary job valuing algorithms to build base pay structures that are consistent, objective and defensible.   Even if positions have different duties associated with them, the value derived from those jobs may be the same or similar.    The software offers an efficient way to evaluate and price jobs based on their value.   The result is a data-based model based on compensable factors.    Referred to as internal equity, this is a foundation of how people are paid in a company using an objective approach.”

Describing the partnership with HRsoft, Johanson noted:  “We recognize the desire of companies to have well-rounded solutions for their compensation issues.   That is the basis of the partnership with HRsoft.    In addition to using internal factors for pricing jobs, the software allows employers to use external market data in the development and validation of their pay structures.    A combination of internal and external data is the best way to value jobs.  The output of the DBSquared system is a complete job structure and corresponding pay ranges for all positions in the company, built using data.”

David Kennedy, CEO of HRsoft, commented:   “Compensation professionals have clear job valuing needs.   Their goal is to pay people fairly.   DBSquared brings a consistent process to value all job classifications and come up with a strong structure for base pay.    Once that is created, the HRsoft Compensation Planning solution lets employers use salary adjustments, merit increases and variable pay to reward employees based on a variety of performance, business and budget factors.   Having a strong base pay structure is a foundation of compensation planning.”

The partnership between DBSquared and HRsoft standardizes data for users of solutions from both companies.   The base pay structure developed in the DBSquared software can be transferred to the HRsoft COMPview solution for presentation to compensation planners and other managers for making further compensation decisions.   Analytics and management reporting of the data is critical for making strategic decisions about compensation.  Reporting supports compliance with the relevant fair pay and equitable pay regulations by identifying areas in need of attention and action.

About DBSquared

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.

About HRsoft

HRsoft supplies innovative Cloud-based compensation planning software solutions that automates the compensation planning process and workflow for employers.   This, in turn, helps 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!

Well, PayScale and Glassdoor indicate that my annual pay should be $80,000!

In today’s SHRM HR Daily Newsletter, an article by Joanne Sammer caught our eyes.  The article was titled, “The Yelping of Pay: Managing Expectations in the Era of Online Salary Data.”  Joanne started the article by stating, “Social media is changing the way employees and job applicants approach discussions with employers about pay.  Employers need to keep up by being more transparent about how compensation decisions are made.”  As HR/Compensation consultants for over 30 years, we agree with Joanne that the online compensation data for most positions is readily a click or two away and many employees and job applicants are doing their homework and being more direct with their employer or potential employer about what they are expecting as it relates to compensation.

We also agree with Joanne that employers need to be “more transparent” regarding their company’s compensation and benefits philosophy, current compensation/benefits offerings and how the company formulates its base and variable pay structure.  When the company or organization has accomplished the items in this paragraph, the following benefits are derived:

  1. The employer can be on the offense and express up front what steps have been taken to establish and vet its compensation structure.
  2. The employer can describe the number of validated survey sources that they use to obtain raw-data salary numbers. They can also explain that many salary source organizations don’t have the ability to validate their pay data that they report for positions on their public websites.
  3. If the employer is using an internal job classification program, they can explain to the employee or potential job applicant how jobs are objectively valued and differentiated from one another.

Savvy HR professionals are ready to meet with employees seeking to increase their pay as well as job applicants desiring to push for the highest salary possible as a part of the employment process. This also means that the HR professionals are maintaining their pay structure on a current basis.  For us, that means staying current with the marketplace as well as keeping job titles, job descriptions and job classifications/job values current.

 

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Compensation and Performance Management Processes are Shifting

On Thursday, March 30th, Salary.com sponsored a webinar on an interesting compensation and performance management topic.  George LaRocque, Principal Analyst and Founder of #HRWINS presented information from a recent “Compensation Practices Driving Cultural Shifts in Performance Management” report.  Mr. LaRocque made the following statement from his report, “As Performance Management Continues to Change, Compensation Policy, Strategy and Data are Becoming More Important to Employers Than Ever Before.”  George stated that many employers are moving from annual performance reviews to more frequent informal feedback sessions that are tied to business goals and attainment.  Mr. LaRocque mentions in his report that a top objective for new HR technology in 2017 is the ability to support supervisors and managers with performance feedback processes and corresponding conversations about compensation. At the end of the webinar, Mr. LaRocque provided the following key takeaways from the #HRWINS report.  For more information about George LaRocque and the #HRWINS report, please visit http://larocqueinc.com/hrwins/.

 

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Pay Equity Position Statement Provided by WorldatWork Compensation Experts

Last month, the WorldatWork released its position statement outlining the role that compensation and rewards professionals have in reducing and eliminating pay inequities in the U.S. workforce. This position statement was requested by the WorldatWork’s Association Board of Directors and Society of Certified Professionals Board in October 2016.  Both Boards recognized WorldatWork’s leadership role in the Compensation arena and its need to provide guidance on this critical issue. In addition, the position statement solidifies WorldatWork’s support for clarifying current federal law over an employee’s right to discuss their pay with others voluntarily.

“Taking a public position on the topic of pay equity was important for WorldatWork to do at this moment in time when employers, public policy makers and others are working to ensure that their pay and compensation practices are valid and do not unintentionally allow for biases or discrimination based on illegitimate factors,” said Cara Woodson Welch, WorldatWork vice president of external affairs and practice leadership. “We are very proud of this statement and hope that it will add to the national dialogue on pay equity in the United States.”

WorldatWork Position Statement on Pay Equity

Issue

Pay equity is a complex and controversial issue influencing the American workplace. The most discussed pay inequity has been a measurable, but debatable, gender wage gap between men and women. Historically, this gap has been determined in different ways, with many credible studies showing women earning less than men on a per-dollar basis. Pay inequity studies are not limited to gender pay issues; rather, they also analyze the compensation of other protected employment classes in categories such as race, age and national origin.

Pay equity debates also look at gender and diversity representation at the executive and leadership levels across organizations. This includes evaluating representation and opportunities for women and minorities on a company’s corporate board of directors. While progress has been made, much still remains to be accomplished for U.S. organizations to achieve true pay equity. WorldatWork fully expects this critical issue to continue to be a key business priority.

Role of the Compensation Professional

As compensation and rewards experts, WorldatWork and its members have an important leadership role to play in the national conversation on pay equity. National policymakers and employers are seeking solutions to eliminate pay disparities in the workplace connected to gender, race, age, national origin or any other protected class.

Current laws need to be enforced by the federal government, but many additional solutions will be found outside of federal public policy initiatives. In addition, rewards and compensation practitioners and the organizations they serve also have a responsibility to reduce or eliminate pay inequities through innovative private-sector workplace programs and policies.

WorldatWork’s Position

WorldatWork strongly supports the current federal laws on pay equity, including the long-established Equal Pay Act, which requires that men and women be given equal pay for equal work in the same establishment.  This law allows pay differentials when they are based on seniority, merit, quantity or quality of production, or a factor other than sex. The association fully supports equal pay for equal work, as well as all federal anti-discrimination laws applicable to employment, including those within Title VII of the Civil Rights Act.

WorldatWork strongly believes that equal work must be measurable. Pay practices that reward performance and all other legitimate factors should remain lawful.

WorldatWork supports pay transparency. We support policies that protect an employee who voluntarily discusses his/her pay or compensation with other employees. Employees must not be retaliated against or fearful of discussing their compensation. An openness on compensation topics and a stronger understanding of an organization’s compensation philosophy will give employees the information they need to make informed decisions about their personal employment and compensation status. WorldatWork respects privacy concerns and does not support initiatives that require employers to disclose confidential pay information of one individual to another interested employee.

WorldatWork endorses regular, organization-wide pay analyses to aid in reducing any unconscious biases or structural barriers in hiring practices, performance reviews, promotional guidelines and leadership opportunities that may contribute to pay inequities. Regular pay analyses conducted against the many factors used in determining compensation programs and individual pay should be supported by policymakers, but remain voluntary. WorldatWork’s members have the responsibility to ensure these analyses are free of discrimination and use accepted compensation practices. If compensation professionals identify inequities through these analyses, these should be communicated to an organization’s management to address the issue. Assessing wages and closing any potential pay gaps based upon gender, race, age, national origin or any other protected class should rest with employers, not the federal government.

WorldatWork believes employers should have access to all relevant employment information when determining compensation for an individual during the hiring process. It is not the intent of our profession to continue past pay inequities when hiring new employees. Compensation should be tied to the specific job and market forces that dictate the rate of pay for that job. In order to make a compelling offer of employment to candidates, WorldatWork opposes policies that prohibit employers from requesting a job candidate’s total rewards history during their consideration and interview process.

WorldatWork supports voluntary adoption of gender-neutral workplace policies such as workplace flexibility and paid family-leave benefits that may help reduce wage gaps and retain employees in the workforce. Public policy should be tailored to encourage organizations to offer these benefits not through universal mandates, regulations or taxes, but rather via policy innovation, support of strategic national goals and individual organizational marketplace initiatives.

The principals of the Johanson Group, HR/Management Consulting firm and DBSquared, LLC support the WorldatWork position statement.  We provide compensation consulting and compensation software that completes the non-discriminatory organization-wide pay analyses that WorldatWork recommends in the highlighted paragraph above.  Our two firms have been providing pay equity reviews and other compensation related services/products since 1973 and 2005 respectively. 

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Employers to Have a Harder Time Attracting and Retaining Top Talent

Recent research completed by Randstad North America says that employers will have to work harder to attract and retain top talented employees. Two factors that are precipitating this talent attraction and retention outcome are low unemployment and a looming labor shortage. Based on the research study, salary and benefits are the most important factors when job seekers are choosing an employer.

Based on a recent WorldatWork news release article, Jim Link, the CHO at Randstad made the following statements, “It’s become a candidate-driven market again, and job seekers have more tools at their fingertips than ever to determine if they are getting paid what they’re worth. As a result, knowing the market average for specific positions, as well as nearby geographies, is critical information to help candidates and employers ensure they receive or make the most competitive offers.” As part of the research data collected from recruiters and a variety of current workforce trends, Randstad predicted that the following jobs would be in demand in 2017.

  • Engineering
  • Finance and Accounting
  • Human Resources
  • Information Technology
  • Life Sciences
  • Manufacturing and Logistics
  • Non-Clinical Healthcare
  • Office and Administration

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More Time for Internal Job Valuing and Exempt and Non-Exempt Status Reviews – FLSA Overtime Rule Appeal Delayed Until May 1st

The Trump administration’s second request to delay a federal court’s appeal on the November 2016 Fair Labor Standards Act (FLSA) overtime regulation injunction was granted last week by the court.  On Feb. 22, the U.S. Fifth Circuit Court of Appeals granted the U.S. Department of Justice’s (DOJ) Feb. 17 request to delay submitting its final brief for another 60 days, citing a need to “allow incoming leadership personnel adequate time to consider the issues.”

The DOJ now has until May 1 to file its response. The additional time will allow the new U.S. Department of Labor Secretary to decide the Trump administration’s formal response and position on the Obama-era overtime regulation. It also leaves employers still uncertain about their work done last year to meet the original Dec. 1, 2016, compliance deadline to begin a $47,476 salary level threshold.

With the additional time for the December 1, 2016 FLSA Overtime Rule to be vetted by the new U.S. Department of Labor Secretary, employers have time to internally evaluate exempt and non-exempt positions based on internal job valuing systems that help to narrow the number of positions that need to go through the FLSA exempt classifications’ tests.

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