Employers Face Challenges in Communicating Compensation Issues

Employers Face Challenges in Communicating Compensation Issues

While employers are increasingly fielding questions from their employees about pay equity, many companies are still struggling to develop an effective approach to compensation communication, the findings of a survey conducted by executive compensation consultancy Pearl Meyer indicate.

The survey of 244 directors and senior executives at U.S. companies was carried out in June 2018. The results showed that 62% of respondents currently are or expect to be fielding questions from their employees on gender pay equity. Of these respondents, a majority indicated that they have clear and detailed information ready to share (30%) or are currently drafting their responses (48%). By contrast, 91% of the executives surveyed reported that they are not getting questions from their employees about the highly publicized CEO Pay Ratio disclosure.

The survey also found that most of the respondents think the quality of their organization’s compensation communication is mediocre, with just 8% of respondents saying they believe the quality is excellent. Although almost half of the executives surveyed (48%) reported that their organization has increased compensation communication in the last two years, slightly more than half (52%) said they are not sharing information about base salary ranges with all employees.

The findings further revealed that while about two-thirds of managers are trained to have formal compensation conversations with their direct reports, the majority (70%) of the executives surveyed believe those conversations are not effective. The survey also showed that less than one-quarter of respondents think employees can appropriately compare their compensation to that of colleagues (21%) or of workers in similar positions in other organizations (22%).

When asked to rate their employees’ understanding of the company’s compensation philosophy, just 8% of respondents said it is very good, while 43% said it is generally okay, and 41% acknowledged it is not good. However, most of the executives surveyed said they believe their employees’ understanding of how their own pay is calculated is either fair (47%) or good (41%). Moreover, when asked how they think their employees would rate the overall value of their organization’s compensation package, only 16% said they believe the rating would be high, while 70% said they think it would be medium.

From Benefit Trends Newsletter, Volume 61, Issue 10

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2018 Liberty Publishing, Inc. All rights reserved.

Salary Budgets Show Signs of Increasing in 2018

Salary Budgets Show Signs of Increasing in 2018

As the labor market tightens, U.S. salary budgets grew by more than 3% for the first time in four years in 2018, according to the results of a global survey on salary budget trends released by human resources consultancy WorldatWork.

The survey, which was conducted in April 2018, collected data on nearly 15 million workers employed in a wide range of organizations and industries across 19 countries. The results showed that the salary budgets in the U.S. have risen by an average of 3.1% (median: 3.0%) in 2018, and are projected to grow by an average of 3.2% in 2019.

Researchers noted that while this growth level is in line with last year’s projection and breaks a four-year trend during which the average salary budget growth rate held steady at 3%, a one-tenth of a percentage increase is not the level of growth that might be expected given the extremely tight labor market and the tax code changes that went into effect this year.

The results also indicated, however, that more employees are progressing in their careers, with an average of 8.6% of U.S. employees receiving promotions in 2017, up from 7.9% in 2016. The survey also found that the mean value of the raises associated with those promotions was 8.7% in 2017, up from 8.4% in 2016.

Researchers observed that several factors could be contributing to this growth in promotion rates in the U.S., including the departure of baby boomers from the labor market and demands by millennial workers for professional growth and development opportunities. They also speculated that employers could be using promotions as a strategy for retaining top employees who otherwise might be lured away as the economy improves and the job market tightens; and that some employers may be relying on promotions to address internal equity issues that arise from hiring outside talent at a premium.

Broken down by industry, the findings indicated that the range of average salary budget increases in the U.S. in 2018 was between 2.5% and 3.6%. The survey showed, for example, that the average salary budget increase for employers in the mining, quarrying, and oil and gas industry rose 0.7 percentage points to 3.6%, although it is expected to fall to 3.3% in 2019. The results further indicated that while the average salary budget increase for employers in educational services was just 2.5% in 2018, it is projected to grow 0.2 percentage points to reach 2.7% in 2019.

The findings also revealed that there was considerable variability in salary budget trends from country to country. Among the countries surveyed in 2018, India was found to have the largest average budget increase at 10%, followed by Russia (7.4%), China (6.6%), Brazil (5.9%), Mexico (4.9%), and Singapore (4.0%). Meanwhile, the countries shown to have the smallest average salary budget increases in 2018 were Switzerland (2.2%), followed by Spain (2.6%), Japan (2.6%), France (2.6%), and Belgium (2.6%).

From Benefit Trends Newsletter, Volume 61, Issue 8

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2018 Liberty Publishing, Inc. All rights reserved.

Business Leaders See Recruiting and Retaining Talent as Vital To Success

Business Leaders See Recruiting and Retaining Talent as Vital To Success

Alongside government regulation and cyber crime, business leaders perceive that the biggest threats to their company’s success are challenges related to recruiting and retaining talent, the results of a report on confidence levels among global CEOs and CMOs released on April 24 by the Worldcom Public Relations Group indicated.

The report’s findings are based on the results of a survey of 585 chief executive officers (CEOs) and chief marketing officers (CMOs) of all business sizes in the U.S., Europe, and Asia. The survey asked business leaders about their confidence levels on a range of issues. The results showed that respondents are most confident in the ability of their organization to satisfy or exceed customer expectations, to have the people and skills needed to achieve its objectives, and to outperform competitors; and are least confident in the ability of their organization to protect itself against cyber crime, to attract and retain the best talent, and to have the technical resources to achieve its objectives.

When asked to identify the factors they believe will have the most influence on their company’s success in the next 12 months, the top factor cited by the business leaders surveyed was their organization’s ability to attract the best talent because of the quality of its employer brand, followed by the strength of the global economy, their company’s access to affordable finance, and changes in the political environment in their country. Smaller shares of respondents said they believe global trade agreements, global instability and the threat of war, the arrival of disruptive competitors, or global warming and extreme weather events will strongly affect their company’s success over the coming year.

The results also showed that the share of business leaders who are planning to give employees—rather than other audiences, such as shareholders and government officials—the most attention in the year ahead was 43% higher in the 2018 survey than in a similar survey conducted in 2017. The findings further indicated that respondents at organizations headquartered in the U.S. have higher overall confidence levels than their counterparts in other countries, while respondents in Asia have the lowest confidence levels. In addition, the survey found that business leaders’ confidence in the ability of their organization to meet challenges declines with the size of the respondents’ company.

Researchers emphasized that younger leaders seem more attuned to macro threats and macro business implications than their older counterparts, noting that much larger shares of respondents under age 35 than over age 45 report seeing extreme weather and climate change, energy costs, data protection, and global instability as among the biggest threats to their company’s success. Older leaders, by contrast, were found to be more optimistic than their younger counterparts about challenges related to the economy, competition, or customer satisfaction.

From Benefit Trends Newsletter, Volume 61, Issue 6

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2018 Liberty Publishing, Inc. All rights reserved.

Demand for Skilled Workers Remains Strong

Demand for Skilled Workers Remains Strong

As the economy picks up, hiring confidence is strong going into the second quarter of 2018, with nearly one in five U.S. employers reporting plans to increase their workforce between April and June, according to the findings of a seasonally adjusted net employment outlook survey conducted by Manpower Group.

The results of the survey of more than 11,500 U.S. employers in 13 industry sectors, released on March 13, indicated that, allowing for seasonal variation, 18% of respondents plan to hire additional staff in Q2. This figure represents a decline of one percentage point compared to Q1 of 2018, and an increase of one percentage point compared to Q2 of 2017.

The findings showed that nationwide, employers in all 13 industry sectors anticipate an increase in staffing levels in Q2 2018. The strongest hiring outlooks were reported in leisure & hospitality (+28%), professional & business services (+23%), wholesale & retail trade (+23%), durable goods manufacturing (+19%), and transportation & utilities (+19%). The sectors with weaker hiring outlooks include construction (+17%), education & health services (+16%), financial activities (+15%), mining (+15%), government (+14%), information (+14%), nondurable goods manufacturing (+12%), and other services (+11%).

Employers surveyed in all four regions in the U.S. reported positive hiring outlooks for Q2 2018. The results showed that the outlook is strongest in the Midwest (+20%), but is nearly as high in the West (+19%), the South (+18%), and the Northeast (+17%). Compared to the outlook in Q2 2017, the hiring prospects in Q2 2018 are slightly stronger in the Midwest (+4% year over year) and the Northeast (+2% year over year), and are relatively stable in the South and the West.

Broken down by state, the strongest employment outlooks for Q2 2018 were reported in Wisconsin (+30%), New Hampshire (+30%), Alaska (+29%), Maine (+29%), and Colorado (+27%). Of the 100 largest metropolitan statistical areas, the strongest job prospects were reported in Provo, UT (+32%); San Antonio, TX (+32%); Madison, WI (+30%); Columbia, SC (29%); Seattle, WA (+29%); and Syracuse, NY (+29%). The metropolitan areas with relatively weak hiring intentions for Q2 include San Francisco, CA (+12%); Allentown, PA (+11%); Youngstown, OH (+9%), and Hartford, CT (+8%).

From Benefit Trends Newsletter, Volume 61, Issue 4

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2018 Liberty Publishing, Inc. All rights reserved.

Employers Are Slow To Formalize Workplace Flexibility Programs

Employers Are Slow To Formalize Workplace Flexibility Programs

Although most employers claim to be committed to workplace flexibility, the majority of companies are still failing to offer the formalized workplace flexibility programs and the part-time, telework, and job-sharing opportunities that are linked to higher employee engagement and satisfaction levels, according to the findings of an annual report on workplace flexibility released in October 2017 by human resources association WorldatWork.

Based on 295 survey responses from WorldatWork members collected between May 17 and June 14, 2017, the report found that large majorities of respondents believe flexibility has a positive or extremely positive effect on employee engagement (64%), motivation (65%), and satisfaction (71%). Nonetheless, just 19% of the employers surveyed said they offer flexibility options to their whole workforce, while 36% said they only offer flexibility on a case-by-case basis with no widespread access.

Researchers observed that while flexibility practices vary by organization, the overall prevalence of these programs has remained fairly consistent since 2013, when a similar survey was taken. The results of the 2017 survey showed that the majority of organizations offer telework on an ad-hoc basis (89%), flexible start and stop times (86%), part-time schedules (79%), phased return from leave (62%), telework on a regular weekly (61%) or a monthly basis (61%), and shift flexibility (51%). Smaller, but still sizable shares of respondents reported that they offer a compressed workweek (45%), full-time telework (38%), and phased retirement (32%). By contrast, relatively few respondents indicated that they offer career on/off ramps (16%) or job sharing (12%).

When respondents were asked what technologies they use with teleworking employees, more than half said they use a virtual private network (VPN) (64%), communication and collaboration software (60%), and instant messaging programs (54%). The results also showed that significant shares of employers cover employee expenses associated with telework, including the cost of laptops (57%), smartphones (31%), mobile device data/voice plans (31%), and software (30%) for teleworking employees.

While a plurality of respondents (41%) said they find it difficult to estimate the productivity of teleworking employees, 57% said they believe that teleworkers are at least as productive as employees working in the office. However, the results also showed that relatively few of the employers surveyed offer specific training on how to be successful while teleworking (11%) or on managing teleworkers (21%).

The findings also indicated that both the guiding principles and the administration of flexibility programs are informal in the vast majority of organizations: 52% of respondents said they have a flexibility strategy or philosophy with few or no written policies that relies primarily on the discretion of managers, while only 14% said they have a formal, written document.

In addition, the survey found that just 16% of respondents reported that they consistently promote their flexibility programs when recruiting new talent, even though more than half (51%) agreed that being informed of flexible work options has a positive impact on the likelihood that a candidate will accept an offer.

From Benefit Trends Newsletter, Volume 60, Issue 11

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2017 Liberty Publishing, Inc. All rights reserved.

Most Large U.S. Companies Choose Their CEO From Within Their Ranks

Most Large U.S. Companies Choose Their CEO From Within Their Ranks

The role of the chief executive officer at large companies is more likely to be filled through internal promotion in the U.S. than in Germany, the UK, or France, the findings of a study by executive search firm Heidrick & Struggles indicated. Released on April 20, the fourth annual “Route to the Top” study examined the backgrounds and experiences of the CEOs of the largest companies in the United States (the largest 100 companies in the U.S., as reported in the Fortune 500), France, Germany, and the UK. The results showed that 85% of the CEOs of the companies in the U.S. were promoted from within the company ranks, compared to 68% in Germany, 61% in the U.K., and 48% in France.

The findings also indicated, however, that the internally promoted CEOs in the U.S. waited longer than their counterparts in Europe to ascend to the top position, and that the European CEOs tended to be younger when promoted. Prior to being tapped as CEO, the U.S. executives had been with the company for an average of 20 years, compared to an average of 14 years for their European counterparts. Meanwhile, internally promoted CEOs in the U.S. were, on average, 53 years old when appointed to the top job, compared with 50 years old in Germany and 48 years old in France and the UK.

Looking at the advancement of women, the study found that there has not only been no progress in the percentage of CEO roles held by women among these large companies, but that in the U.S., the number of female CEOs among the largest 100 companies actually declined over the past year. While the results showed that the share of female CEOs is, at 8%, higher in the U.S. than in the UK (6%), France (2%), or Germany (1%); researchers pointed out that the share in the U.S. is down by one percentage point from the previous year.

Somewhat surprisingly, the analysis revealed that the number of CEOs at the largest companies who have a master’s degree in business administration has declined sharply over the past five years in the U.S. The results showed that in 2017, only 35% of the U.S. CEOs hold an MBA degree, down from 42% last year and 49% five years previously. The study found a similar trend in France, where 26% of the CEOs have an MBA in 2017, down from 37% five years previously; while in the UK, 30% of the current CEOs have an MBA, unchanged from five years previously. In Germany, where advanced technical degrees are more common than MBAs among top executives, the share of CEOs with an MBA has declined to 11% currently from 16% five years previously.

The study also looked how many of these companies are led by a foreign national. The results showed that just 13% of the companies in the U.S. currently have a non-national CEO, up slightly from 11% five years previously. The analysis further indicated that the shares of companies with foreign nationals serving as the CEO in 2017 are similarly low in Germany (at 17%) and France (at 10%); but are much higher in the UK, where 40% of the CEOs are currently non-nationals.

A breakdown of the professional backgrounds of the CEOs currently heading up the largest companies showed that finance is the most common type of background for the CEOs in the UK (36%), the U.S. (31%), and Germany (26%); while engineering is the leading professional background of the CEOs in France (24%).

From Benefit Trends Newsletter, Volume 60, Issue 6

The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2017 Liberty Publishing, Inc. All rights reserved.