A Talent Retention Agreements Becoming More Effective

A Talent Retention Agreements Becoming More Effective

While financial retention agreements designed to ensure that acquired talent remains with the new company during a merger or acquisition appear to have become more effective in recent years, the acquiring companies are often unsuccessful in holding on to senior leaders after the initial retention period is over, according to the results of a global study on M&A retention conducted by human resources consultancy Willis Towers Watson.

The study’s findings are based on survey data collected between March and May 2017 from 244 respondents across 24 countries in Asia, the Americas, and Europe. Within the past two years, 91% of the respondents had acquired another organization, 10% had merged, and 6% had been acquired.

The survey results showed that 79% of acquirers had been successful in retaining at least 80% of their employees with agreements through the end of the retention period, up from 68% of acquirers who participated in a similar survey on global M&A retention conducted in 2014. However, citing previous research, the study’s authors observed that after the one-year period, only around one-half of the above mentioned companies retained at least 80% of employees who had signed agreements.

In addition, the survey found that cash bonuses, most commonly expressed as a percentage of base salary, continue to be the primary financial award in retention agreements for senior leaders (77%) and other key employees (80%).

The findings also suggested that there are compelling reasons why acquirers should begin the retention process early by focusing on senior leaders. For example, the survey showed that nearly one-quarter (24%) of acquirers asked the senior leaders at the target company to sign retention agreements before the initial merger agreement was signed; and that early communication with senior leaders is a clear differentiator between acquirers with high (28%) and low (11%) retention rates.

Moreover, the survey found that of the employees with retention agreements who left the company before the end of the retention period, 44% blamed the new or changing culture. Among the other reasons cited for leaving were being aggressively pursued by competitors (36%) and not liking their new role (25%).

The results also showed that the size of the median retention budget has been declining: according to the survey, more than half of the acquirers (55%) polled in 2017 reported having a retention budget representing less than 1% of the total transaction cost—or nearly 50% less than 2014, when the median budget value was 1.9%.

From Benefit Trends Newsletter, Volume 60, Issue 12

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.

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.

Companies Increase Their Use of Pay-For-Performance Incentives

Companies Increase Their Use of Pay-For-Performance Incentives

More than 60% of large-cap companies provide at least half of CEO equity compensation through performance incentives, up from just one-third five years ago, according to a report on equity compensation trends recently published by executive compensation benchmarking firm Equilar.

The report’s findings, released on September 20, are based on an analysis of the Equilar 500, an index that comprises the largest U.S.-listed companies by revenue adjusted to approximate the industry sector mix of similar large-cap indices. The study examined the equity compensation design and granting practices of Equilar 500 companies, and tracked these data for those companies over the last five fiscal years.

The results of the analysis showed that the percentage of companies in the index that provided at least half of CEO equity compensation based on performance awards increased from 52.5% in the fiscal year 2015 to 60.8% in 2016; and that the total share of Equilar 500 companies providing CEO performance awards has increased significantly over the past few years, from 69.7% of companies in 2012 to 82.1% of companies in 2016.

According to the study, the remaining portion of equity compensation was time-based, which means that awards vest at specific time periods, rather than being contingent on meeting particular performance goals to become eligible to receive allocations of stock or stock options. The research indicated that most CEOs continue to receive time-based as well as performance awards, with nearly 40% of companies in 2016 providing a majority of equity compensation in the form of time-based awards. However, the study also found that a growing share of these time-based awards are being provided as restricted stock, rather than as stock options.

Broken down by sector, the analysis showed that 90.5% of industrial goods companies, 86% of healthcare companies, and 84.6% of utilities provided performance awards to CEOs in 2016. The technology sector saw the largest growth in the percentage of companies offering performance awards to CEOs during the study period, increasing from 63.7% in 2012 to 82.3% in 2016.

From Benefit Trends Newsletter, Volume 60, 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 © 2017 Liberty Publishing, Inc. All rights reserved.

A Range of Strategies Are Used to Manage Leave Programs

A Range of Strategies Are Used to Manage Leave Programs

As the legal statutes mandating and regulating employee leave grow in scope, complexity, and unpredictability, many employers are struggling to remain compliant, while continuing to use paid leave as a recruitment and retention tool, according to the results of a survey on leave management conducted by the Disability Management Employer Coalition (DMEC), an association that educates employers on managing their disability and absence programs.

The findings of the survey of more than 1,100 U.S. employers of various sizes and industries were released on March 6. The survey asked employers about the challenges they face as they seek to effectively implement and manage their leave policies, while dealing with the complexities involved in complying with the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act and Amendments Act (ADA/AA), and other Federal statutes; as well as state, county, and city leave laws.

The survey found that employers are increasingly choosing to outsource FMLA management, although relatively few are outsourcing the management of ADA accommodation. The results revealed that many employers are selecting a vendor that offers an integrated solution for managing FMLA compliance, short-term and long-term disability programs, and employee assistance programs (EAPs). The survey also showed that satisfaction with outsourcing is high, as employers believe it improves compliance, customer service, and efficiency.

The findings further indicated that while most of the surveyed employers report that they are increasingly skilled at managing a complex leave landscape, many believe that more manager training and online tools are needed. Significant shares of respondents also said they believe that training and other resources should be extended to legal staff, consultants, and third-party administrators (TPAs).

In addition, the survey found that as the uniformity and centralization of policies increases, employers are moving toward adopting more comprehensive absence management approaches that improve their preparedness for U.S. Department of Labor (DOL) and Equal Employment Opportunity Commission (EEOC) inquiries. The results showed that large employers have in-house legal resources for achieving uniformity and centralization, while smaller employers (fewer than 500 employees) are more likely to use external legal counsel.

The survey also indicated that large shares of employers are attempting to stay ahead of the legal and regulatory curve by asking legal counsel to help them construct leave programs that are more generous than required. More than three-quarters (78%) of respondents said their organization has paid leave programs that include parental leave and other family member leave, while 77% said paid leave is available to all of the employees in their organization. A further 35% of respondents said their company has a separate paid leave policy.

Moreover, the survey found that employer use of automated systems for FMLA management is growing, with the numbers of employers making electronic rather than manual updates to their human resource information system (HRIS), time and attendance, and payroll systems increasing slowly. According to the survey, respondents believe that in addition to providing much needed regulatory expertise, automation reduces the time and resource burden associated with managing these systems, and makes it easier to produce reports that provide useful and actionable data.

e leaders surveyed said they believe that employees are increasingly looking for development and coaching opportunities, and 53% said they think that personalizing feedback and coaching would significantly improve employee performance; 52% of the leaders acknowledged that the annual review process is often used as an alternative to engaging in actual performance development, and 73% of the employees polled reported that they have not seen performance management practices move away from a focus on paperwork to a focus on conversations.

Yet researchers observed that some companies are experimenting with new approaches to performance management: for example, rewards can be allocated based on real performance data or survey data from all of an employee’s project leaders, or employees can determine rewards for one another in a crowdsourced approach.

From Benefit Trends Newsletter, Volume 60, 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 © 2017 Liberty Publishing, Inc. All rights reserved.

Employers Should Do More to Retain Restless Employees

Employers Should Do More to Retain Restless Employees

As large shares of employees indicate that they are planning to look for another job in the near future, employers should seek to improve the job candidate experience during the hiring process, increase engagement and retention among current employees, and develop a more transparent culture and a leadership structure that align with the needs of today’s workforce, a report by recruitment firm ExecuSearch Group recommended.

Released on January 12, the report’s findings were based on the results of a survey of more than 1,000 job seekers, working professionals, and hiring decision makers across a number of industries. The survey found that 50% of the working professionals intend to stay at their current company for only two years or less, and that 61% of these respondents reported they had been interviewing for two or more roles during the interview process for their current position.

The findings also suggested that employers are struggling to retain and hire top talent. When asked why employees leave their company, the top reasons cited by the recruitment professionals surveyed were a lack of advancement opportunities, a lack of salary growth, a negative work-life balance, and a poor corporate culture.

The survey results further indicated that employers are not providing the hiring experience expected by job candidates: 75% of the recruitment professionals polled stated that their hiring process, from initial interview to offer, takes more than three weeks—even though the vast majority said they believe the process should take two weeks at most.

When asked about their experiences of the hiring process for their current job, 34% of the working professionals said their interviewer could not convey the overall impact that their role has on the company’s goals, and 45% said they did not feel that their interviewer made the effort to give them an introduction to the culture.

The survey findings also appear to suggest that employers should take a more active approach to culture, retention, and leadership development: of the working professionals surveyed, 42% said they feel that the executive leadership at their organization does not contribute to a positive company culture, and 48% said they do not believe that their company encourages younger employees to pursue leadership positions. However, more than half (59%) of the working professionals polled reported that having access to projects to help keep their skills up-to-date would keep them satisfied at their current company.

In addition, the survey uncovered a disconnect between the goals of younger employees and employers: while 76% of the millennial working professionals cited having professional development opportunities as one of the most important elements of company culture, 74% of the recruitment professionals said that millennials are not prepared for leadership positions.

When asked to rank the importance of various kinds of opportunities for professional development, the top responses from working professionals were an emphasis on work-life balance, collaboration with team members, and access to leadership/management. Moreover, when asked which benefits other than health benefits would make them happier at their current company, the most common responses of the working professionals were flexible scheduling, greater vacation allowance, recognition by supervisors, and interesting projects or work.

From Benefit Trends Newsletter, Volume 60, Issue 3

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.

Paid Time Off Banks Gain Ground On Traditional Paid Leave Systems

Paid Time Off Banks Gain Ground On Traditional Paid Leave Systems

While most employers continue to offer paid time off to employees, the percentage of companies that provide workers with banks that combine different types of paid leave is growing, while the share of organizations that offer traditional paid time off arrangements is declining, the results of a survey recently conducted by nonprofit human resources association WorldatWork indicate.

The survey of 667 WorldatWork members, most of whom work at the managerial level or higher of a large company in North America, was conducted January 20-February 5, 2016. The goal of the survey was to examine paid time off (PTO) bank-style and traditional paid time off programs and practices.

The results showed that 88% of respondents believe it is necessary to offer some type of paid time off program to be competitive in the labor market. The top three reasons cited for offering these programs were encouraging employees to rest and rejuvenate, improving employee attraction, and satisfying employee paid time off expectations. Just 10% of the HR managers surveyed said their company is required by law to provide some or all of their employees with paid time off, but a majority (61%) said their organization encourages employees to take paid time off.

Traditional leave systems allocate employee paid time off as separate entitlements, such as vacation, sick, and personal days. A paid time off bank, by contrast, offers a combined pool of days that can be taken at the employee’s discretion for a variety of absence types. The 2016 survey found that the use of PTO bank-type systems is gaining ground on traditional arrangements: 43% of respondents reported that their company has a PTO bank, up from 41% in 2014 and 28% in 2002; while 52% of respondents indicated that their organization has a traditional system, down from 56% in 2014 and 71% in 2002.

The respondents at companies with a PTO bank said they believe PTO banks offer greater workplace flexibility (63%) and are easier to administer (55%) than a traditional system. More than 40% of these respondents reported that the PTO bank improved absenteeism when it was first implemented, and 69% said their company features their PTO bank as a key employee benefit when attempting to attract new employees.

 

The survey also showed that at most organizations with traditional systems employee tenure determines total paid days off. On average, the respondents indicated that their organization offers each employee 10 to 22 days of vacation time, seven to 11 days of sick leave, and 3.5 personal days per year.

The findings further revealed that 26% of the respondents at an organization with a traditional system reported that their company is considering rolling various types of leave together to offer employees a PTO bank-type system. The top reasons they cited for transitioning to a PTO bank-type system were the simplicity of plan administration, cost savings, competitiveness, and flexibility.

Benefits Trends, Volume 59, Issue 7

The information contained in this post 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. The information in this post is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2016 Liberty Publishing, Inc. All rights reserved.