H E A L T H W E A L T H C A R E E R

G E T T I N G A H E A D O F T H EG E T T I N G A H E A D O F T H E2 0 1 6 C O M P E N S AT I O N P L A N N I N G C U R V EC U R V EFebruary, 2016

Presenter:Sean MacHale, PrincipalTalent Office Business Leader, Atlanta

T A B L E O F C O N T E N T S

E C O N O M I C O V E RV I E W

W O R K F O R C E R E WA R D SOverall TrendsMinimum WageFLSASalary Increase BudgetsSalary Increase BudgetsCompensation TrendsCareer Frameworks

T H E F U T U R E O F TO TA L R E WA R D S

© MERCER 2015 1

ECONOMIC OVERVIEW

© MERCER 2015 2© MERCER 2015 2

E C O N O M I C A N D M A R K E T C O N T E X T

Uncertain, volatile, and ambiguous U.S. economy is still rebounding – what does 2016 hold?

S I G N S O F E C O N O M I C I M P R O V E M E N T

5.4%$ vs. €GDP 2016

Unemployment is at 5.4% for 2015.

The US dollar is expected to

World GDP is expected to grow

by 3 5%

The Consumer Confidence Index remains high and strengthen against

the Euro. by 3.5%. remains high, and

inflation will slow.

© MERCER 2015 3Sources: Economist Intelligence Unit 2015,

“RBC Economics Economic and Financial Market Outlook” June 2015, U.S. Bureau of Labor Statistics 2015

E C O N O M I C A N D M A R K E T I N D I C A T O R S

There are indicators of economic recovery as unemployment continues to decline and CPI increases.

2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 58.3% 8.2% 8.0% 7.8% 7.7% 7.5% 7.2% 7.0% 6.6% 6.2% 6.1% 5.7% 5.6% 5 4%

3.3%2.8% 3.1%

2.0% 1.6% 2.0%2.6%

1.7%2.6% 2.9% 2.5% 2.9%

2.3% 2.0% 2.0%1.7%

5.4%

1.3%

2.8%1.9% 1.7% 1.9%

1.4% 1.5% 1.2% 1.4%2.1% 1.8% 1.2%

-0.1% 0.0% 0.4%1.0%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3* Q4*

GDP CPI** Unemployment

© MERCER 2015 4Sources: Economist Intelligence Unit 2015,

CareerBuilder June 2015 *Quarter forecast**CPI is typically used as an indicator of inflation.

WORKFORCE REWARDS

© MERCER 2015 5© MERCER 2015 5

T A L E N T A N D P A Y C H A L L E N G E S

4.6% 77% 4.6 million

Employers spent an average ofCompanies are planning for a Proposed FLSA regulations will

Employers spent an average of $11K per worker for health

benefits in 2014.

normal merit cycle and will adjust when/if new minimum

wages go into effect.

cause ~4.6 million exempt employees to become non-

exempt.

2x as fast2.8%vs. 2.9% 3 months

Voluntary turnover is growing t f t t (9 8%) d

2015 salary increases are at 2 8% d 2016 i j t d t

Within three months of being hired 65% of people look at at a faster rate (9.8%) compared

to involuntary turnover (4.7%).2.8%, and 2016 is projected at

2.9%.hired, 65% of people look at

new jobs.

© MERCER 2015 6Sources: “2015 Mercer U.S. Minimum Wage Survey” (preliminary results),

SHRM: “Study Finds Most Workers Actively Seeking New Opportunities” July 2015, Dol.gov, “2015 U.S. MBD,” SHRM: “HR’s Greatest Challenge: Driving the C-Suite to Improve Employee Engagement and Retention”

M I N I M U M W A G E C H A N G E S

o f compan ies who a re p roac t i ve ly inc reas ing

o f compan ies a re c lose ly examin ing proac t i ve ly inc reas ing

wages , expec t to see h igher re ten t ion o f emp loyees as a resu l t .

84%c lose ly examin ing compet i to rs ’ moves and have p lans to make ad jus tments .

42%

IF LEGISLATION REQUIRES WAGE HIKES COMPANIES PLAN TOHIKES, COMPANIES PLAN TO…Pass cos ts to supp l i e rs /vendors . 15%

53%P a s s c o s t s t o c o n s u m e r s

38%R e d u c e w o r k f o r c e .

o f compan ies a re id i d i f l l

51%53%P a s s c o s t s t o c o n s u m e r s .

Of fse t cos ts by ad jus t ing o the r a reas o f to ta l rewards . 58%

cons ider ing reduc ing fu l l -t ime and add ing par t - t ime

emp loyees to reduce benef i t expenses .

© MERCER 2015 7Source: “2015 Mercer U.S. Minimum Wage Survey” (preliminary results)

Multiple responses allowed.p

F L S A E N V I R O N M E N T A L S C A NR I S K W A S I N C R E A S I N G P R I O R T O P R O P O S E D C H A N G E S

N u m b e r o f C a s e s F i l e d H a s C o n s i s t e n t l y I n c r e a s e d *

R e g u l a t o r y C h a n g e s

• P r o p o s e d c h a n g e s e f f e c t i v e 2 0 1 6M i t i l l t f l i i t h• M a n y c o m p a n i e s s t i l l o u t o f c o m p l i a n c e w i t h 2 0 0 4 u p d a t e s

• D O L h a s c o n s i s t e n t l y g r o w n i n v e s t i g a t i v e s t a f f a n d p r o v i d e d e m p l o y e e o u t r e a c h p r o g r a m s t o p r o t e c t e m p l o y e e ’ s r i g h t s

Typ e s o f V i o l a t i o n s Va r y* * Ta r g e t e d M a r k e t i n g t o E m p l o ye e s

• “ O v e r t i m e A t t o r n e y ” a d v e r t i s i n g o n T V , w e b• M o r e d i f f i c u l t t o p r o v e w r o n g f u l t e r m i n a t i o n

c h a r g e s c o n v e r t i n g t o e a s i e r - t o - p r o v e F L S A c l a i m s * * *

© MERCER 2015 8Sources:

* Seyfarth Shaw LLP 2014 Report on Federal Judicial Caseload** NERA Economic Consulting, Trends in Wage and Hour Settlements: 2015 Update

*** Annual Workplace Class Action Litigation Report 2010 Edition, Seyfarth Shaw LLP

T A L E N T A N D P A Y C H A L L E N G E SP R O P O S E D F L S A R E G U L A T I O N SP R O P O S E D F L S A R E G U L A T I O N S

Proposed FLSA regulations will have significant implications for talent management.

May create cha l lenges

for

4.6 mi l l ion*current ly exempt

Supervisors and managers

may require

Salary threshold more than for

implement ing f lex ib le work

weeks — a b i t t t

pemployees

to be reclassi f ied

y qincreases to

compensat ion to maintain

more than doubled

from $455 to $970 per big a t t ractor

for Mi l lennia ls

as non-exempt

suff ic ient job level

progression

$970 per week

Must st i l lMust st i l l meet dut ies

test

© MERCER 2015 9Sources: 2015 dol.gov

SHRM “FLSA Stifles Work Flexibility, HR Director Testifies” June 2015*Estimated by the US DOL

S A L A R Y I N C R E A S E B U D G E T S

• 98% of participating organizations awarding salary increases.

• 2.8% average base salary increase.

• High performers get 1.8 x the salary increase of an average performer.

• 2015 salary increases remain consistent with last five years.2015 salary increases remain consistent with last five years.

• 2.9% average 2016 base salary increase budget.

© MERCER 2015 10

S A L A R Y I N C R E A S E B U D G E T S C O N S I S T E N T

YEAR ALL EMPLOYEES EXEC MGMT PROFESSIONAL CLERICAL TRADES/

PRODUCTION

2016(projected) 3.0% 3.0% 3.0% 3.0% 2.9% 2.9%

2015( t l) 2.9% 3.0% 2.9% 2.9% 2.9% 2.8%(actual)

2014 (actual) 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

2013 (actual) 2.9% 3.0% 2.9% 2.9% 2.9% 2.9%

2012 2 9% 3 0% 2 9% 2 9% 2 9% 2 8%2012 (actual) 2.9% 3.0% 2.9% 2.9% 2.9% 2.8%

2011 (actual) 2.9% 3.0% 2.9% 2.8% 2.8% 2.8%

Source: Mercer 2015/2016 US Compensation Planning Survey Report. All industries, all locations, excluding zeros.

© MERCER 2015 11

E N E R G Y S E C T O R S A W D R A M A T I C D E C L I N E

2015 Actual 2016 Projected 2015 Projected

3.5%

4.0%

2015 Actual 2016 Projected 2015 Projected

% % % % % % % %

2.0%

2.5%

3.0%

3.0%

2.9%

2.9%

2.9%

2.9%

2.6%

2.6% 2.9%

2.9%

2.8%

2.8%

2.8%

2.7%3.

1%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

2.9%

2.9%

2.9%

2.9%

2.8%

2.8%

0 5%

1.0%

1.5%

0.0%

0.5%

Source: Mercer 2015/2016 US Compensation Planning Survey Report.

© MERCER 2015 12

S T R U C T U R E A D J U S T M E N T S

STRUCTURE

2.4% 2.2%A L L E M P L O Y E E S

ADJUSTMENTS

72%2.5% 2.3%

2 4% 2 2%

E X E C U T I V E

M A N A G E M E N T

72%2.4% 2.2%

2.4% 2.3%

M A N A G E M E N T

P R O F E S S I O N A LS a l e s a n d N o n -

s a l e s

O F PA R T I C I PAT I N G O R G A N I Z AT I O N S P L A N T O

A D J U S T T H E I R S A L A R Y S T R U C T U R E I N 2 0 1 6

2.3% 2.2%

2.4% 2.2%

s a l e s

O F F I C E / C L E R I C A L / T E C H N I C A L

T R A D E / P R O D U C T I O N / 2.4% 2.2%

2015ACTUAL

2016PROJECTED

S E R V I C E

© MERCER 2015 13

ACTUAL PROJECTEDExcludes 0s

Source: Mercer 2015/2016 US Compensation Planning Survey Report.

S A L A R Y I N C R E A S E B U D G E T S : F R E E Z E S

Only two percent of organizations reported salary freezes across all their employee groups in 2015 year-to-date.

8.7%

10%2014 2015 Projected 2016

7.5%7.0% 7.2% 7.1%8%

atio

ns

4.1%4%

6%

of O

rgan

iza

2.8%2.3% 2.2%

2.7%

1 1%2%

4%

Perc

ent

1.1%0.6% 0.7% 0.6%

1.0%

0%Executive Management Professional Office/ Clerical/ Trades/ Production/

© MERCER 2015 14

g(Sales & Non-Sales) Technician Service

Source: “2015/2016 U.S. Mercer Compensation Planning Report” effective July 2015

S A L A R Y I N C R E A S E B U D G E T S : P E R F O R M A N C E

80% of organizations have a pay-for-performance philosophy as a part of their compensation program; only 22% measure the effectiveness of their philosophy.

7 8H I G H E S T 5 04 8% of WorkforceAverage 7

29

8

27

H I G H E S T

N E X T H I G H E S T

5.0

3.8

4.8

3.7

Increase

55 54M I D D L E 2.82.7

7 8L O W 1.1

0 1

1.0

0 2 2

051015202530354045505560A C T U A L 2 0 1 5

3

0 5 10 15 20 25 30 35 40 45 50 55 60P R O J E C T E D 2 0 1 6

L O W E S T 0.10.2

© MERCER 2015 15Source: “2015/2016 U.S. Mercer Compensation Planning Report” effective July 2015

( N = 5 1 9 ) ( N = 4 2 9 )

P E R F O R M A N C E M A N A G E M E N T – T O R A T E O R N O T T O R A T E T H A T I S T H E Q U E S T I O NN O T T O R A T E , T H A T I S T H E Q U E S T I O N

Companies areCompanies are abandoningtraditional performance ratings.

Complaintsinclude

Mercer’s Point of View

Too cumbersomePERFORMANCE MANAGEMENT WILL EVOLVE

static Time consuming

• Closely l inked to corporate culture and values

• Multiple PM t f i

Check the box

complexity

systems for various parts of the organization

• Continual feedback mobile

compliance vs developmental

feedback, mobile enabled

• Shift in way pay and performance is judged

© MERCER 2015 16

judged

C A R E E R D E V E L O P M E N T : P R O M O T I O N A L I N C R E A S E SI N C R E A S E S

9.5%

8.5%

9.0%Executive

Managementase

Sala

ry

7 5%

8.0%

g

Professional (Sales & Non-Sales)ce

ntag

e O

f Ba

7.0%

7.5% (Sales & Non-Sales)

Office/Clerical/Technician

ases

as

a Pe

rc

6.0%

6.5%

Trades/Production/Service

otio

nal I

ncre

a

5.0%

5.5%

2011 2012 2013 2014 2015

Prom

o

© MERCER 2015 17

2011 2012 2013 2014 2015

Source: “2015/2016 U.S. Mercer Compensation Planning Report” effective July 2015

S H O R T - T E R M I N C E N T I V E S

84% HAVE INCENTIVE PLANS FOR AT 84% LEAST ONE SEGMENT OF THEIR EMPLOYEE POPULATION Type of Incentive

% of organizations

Management Incentives 84%

10%9%Individual incentives for non-management employees 63%

Sales Incentives 51%10%OF PARTICIPATING ORGANIZATIONS

9%OF PARTICIPATING ORGANIZATIONS

Spot cash awards 41%

Team/small group incentives 15%

INCREASED TARGETINCREASED NUMBER

Cash profit sharing 13%

Project milestone incentives 12%

Gain sharing plans 7%INCREASED TARGET PAYOUT

OPPORTUNITY FOR ELIGIBLE

EMPLOYEES

INCREASED NUMBER OF EMPLOYEES ELIGIBLE FOR INCENTIVES

Gain sharing plans 7%

© MERCER 2015 18Source: “2015/2016 U.S. Mercer Compensation Planning Report” effective July 2015

A T T R A C T I O N & R E T E N T I O N

MILLENNIALS:Of those in the labor force, 71% are actively DIGITAL NATIVES

MILLENNIALS FEELhe ld back by r ig id or JOB FAMILIES

seeking or are open to a new job.

y goutdated work ing s ty les , and cu r ren t emp loyers do not

k f l l f th

7%

Di f f i cu l t to rec ru i t19% 13% 7%

JOB FAMILIES

make fu l l use of the sk i l ls t hey cu r ren t l y have to o f fe r.

D i f f i cu l t to re ta in

17% 11% 7%

Pr ize be ing par t o f a good team and work ing on exc i t ing pro jectspro jects .

I T P R O F E S S I O N A L

E N G I N E E R I N G P R O F E S S I O N A L

S A L E S P R O F E S S I O N A L

© MERCER 2015 19Sources: “2015/2016 U.S. Mercer Compensation Planning Report” effective July 2015,

Workforce Solutions Review. “Will You Attract the Leaders of the Future with Moth-eaten Practices? That’s Risky Business!”“Most In-Demand Engineers Around the World”, October 2014, SHRM: “Study Finds Most Workers Actively Seeking New Opportunities” July 2015

T U R N O V E R

TOP REASONS EMPLOYEES LEAVE INDUSTRIES WITH GREATEST MEDIAN

Career Change(25%)

Promotion Opportunity

(15%)

Job Satisfaction

(9%)

GREATEST MEDIAN VOLUNTARY TURNOVER

Retail & Wholesale(15%) (9%) Retail & Wholesale45.3%

Energy

Base Salary(8%)

Personal/Family(8%)

12.7%

Other DurableGoods Manufacturing

11.7%

Services(Non-Financial)

11.1%

6% o f c o m p a n i e s a l s o s a i d t h a t t h e r e a s o n f o r e m p l o ye e

s e p a r a t i o n w a s r e t i r e m e n t

© MERCER 2015 20Sources: “Mercer Turnover Survey – Employee Separations in 2013 (U.S.)”,

SHRM: “HR’s Greatest Challenge: Driving the C-Suite to Improve Employee Engagement and Retention,”“2015 United States and Canada Workforce Metrics Solution Turnover Survey”

E N G A G E M E N T P A R A D O XI L O V E M Y J O B B U T I A M S T I L L L E A V I N GI L O V E M Y J O B , B U T I A M S T I L L L E A V I N G

In the US, two out of five workers are seriously considering leaving their organization at the present

time.

Employers face loss of valued talent, even among those who are most satisfied.

Disaffected workers create further drain on productivity and morale.

© MERCER 2015 21

S I G N I F I C A N T N U M B E R S E R I O U S L YC O N S I D E R I N G L E A V I N G A T P R E S E N TC O N S I D E R I N G L E A V I N G A T P R E S E N T

% of workers seriously

41%Ages 18–34

201133%

% of workers seriously considering leaving their job

44%

31%Ages 35 49

g

In 2011, 33% of workers were seriously

considering leaving.

Today

39%

25%

Ages 35–49g g

29%

27%

Ages 50–64

Today 37% of

37%

14%

27%Ages 65+

T d d t b d I id E l ’ Mi d 2011

Today, 37% of workers are

seriously considering leaving.

© MERCER 2015 22

Trend data based on Inside Employees’ Minds 2011.

T H O S E S E R I O U S L Y C O N S I D E R I N G L E A V I N G A R E S A T I S F I E D W I T H M A N Y A S P E C T S O F J O BA R E S A T I S F I E D W I T H M A N Y A S P E C T S O F J O B

45% of those who are very satisfied with their organization.

42%42% of those who are very satisfied with their job.

45% of those who rate their benefits package as very good.

37% 46% who strongly agree that they have sufficient opportunity for growth and development in their organization.

The 37% who are seriously considering

leaving their organization today include:

48% who strongly agree that their organization as a whole is well-managed.

48%48% who strongly agree that they are paid fairly given their performance and contributions to their organization.

© MERCER 2015 23

P R I O R I T I E S F O R 2 0 1 6C A R E E R F R A M E W O R K : W H A T I S I T ?C A R E E R F R A M E W O R K : W H A T I S I T ?

An approach that defines and organizes jobs so that:

• HR and business leaders understand, allocate, communicate rewards and career opportunities.

• HR technology and analytics leaders share critical workforce data across multiple technology platforms enhancing workforce analysis and accelerating new HRIS installationsplatforms, enhancing workforce analysis and accelerating new HRIS installations.

• Employees can effectively manage their career choices within the organization by having available information and tools.

• An organization can specify the desired compositionAn organization can specify the desired composition, capabilities, and requirements of the workforce enabling increased business performance.

A well developed, clearly articulated career framework serves as an anchor to many

th HR dother HR programs and processes.

© MERCER 2015 24

P R I O R I T I E S F O R 2 0 1 6F O C U S O N S A L E S C O M P E N S A T I O N

1. Changing plans to drive better organic growth.

2 Si lif i l t d t di d f ff t k t i

F O C U S O N S A L E S C O M P E N S A T I O N

2. Simplifying plans to ensure understanding and focus efforts on key metrics.

3. Designing plans that are attractive existing employees and millennial new hires.

4 Harmonizing globally while balancing local needs4. Harmonizing globally while balancing local needs.

5. Updating plans to align with evolving business objectives.

6. Setting equitable, attainable goals/quotas.g q , g q

7. Selecting metrics that provide line-of-sight for each role.

8. Striking the right balance between individual impact and team/region performance.

9. Appropriately paying for very large “mega” deals and/or multi-year deals.

10 Effectively aligning sales management and frontline sales pay10. Effectively aligning sales management and frontline sales pay.

11. Communicating effectively at roll-out with updates throughout the plan year.

12 Capable plan administration that delivers timely accurate pay outs

© MERCER 2015 25

12. Capable plan administration that delivers timely, accurate pay outs.

THE FUTURE OF TOTAL REWARDS

© MERCER 2015 26© MERCER 2015 26

Y O U R T H O U G H T S A B O U T T H E F U T U R ET R U E O R F A L S E ?T R U E O R F A L S E ?

BY 1. Total Rewards will be customized for each employee.BY 2. Employees will have more risk through incentive compensation.

3. Employer sponsored benefits will become more prominent.

4. Organizations will reduce training and development expenditures.

5 H lth ill i il b id d th h t5. Healthcare will primarily be provided through government programs.

6. The workforce will have more contingent workers than today.

7. Performance management ratings will have disappeared.

8. Increased workplace flexibility will be the norm: hours, pays, etc.

9. All pay will be transparent.

10. Pay disparity between haves and have-nots will have decreased.

© MERCER 2015 27

H O W W I L L O R G A N I Z A T I O N S R E S P O N D ?C O N T I N U E D L A B O R F O R C E R A T I O N A L I Z A T I O NC O N T I N U E D L A B O R F O R C E R A T I O N A L I Z A T I O N

PRE-1880 1880-1980 TODAYINDUSTRIAL REVOLUTION

THE FREE AGENT

T H E T H E T H ET H E

artisanT H E

employeeT H E

free agent

• Independent• Self sufficient

• Big is better• Asset based

• Small is nimble• Knowledge based• Self-sufficient

• Apprentice model• Asset-based• Standard processes

• Knowledge-based• Decentralized reward

system with individual accountability

© MERCER 2015 28

H O W W I L L O R G A N I Z A T I O N S R E S P O N D ?T A L E O F T W O W O R K F O R C E S : C O R E V ST A L E O F T W O W O R K F O R C E S : C O R E V S . C O N T I N G E N T

COMPANY

CORE

CONTINGENT

CORE WORKERS

WORKERSNURTURED, INDIVIDUAL

ACCOUNTABILITYFREE AGENTS, CONTRACTORS

© MERCER 2015 29

H O W W I L L O R G A N I Z A T I O N S R E S P O N D ?T H O U G H T F U L R E S P O N S E S : P E R S O N A L I Z E D E V PT H O U G H T F U L R E S P O N S E S : P E R S O N A L I Z E D E V P F O R C O R E W O R K E R S

20202015YESTERDAY

Standardize Individualize

Core employees viewed asConfusion about employment Core employees viewed as crucial for success

Confusion about employment relationshipHire to retire

Individual accountabilityIndividual accountability for benefits, careers and workplace

Transactional employment relationshipPaternalistic

Personalized rewards reflecting global cultures and multi-generations

Limited rewards flexibilityOne-size-fits-all

© MERCER 2015 30

H O W W I L L O R G A N I Z A T I O N S R E S P O N D ?P R O G R E S S I V E E M P L O Y E E R E L A T I O N SP R O G R E S S I V E E M P L O Y E E R E L A T I O N S

20202015YESTERDAY 2020

Authoritative Participatory

2015YESTERDAY

Employees as volunteersEmployees as necessary evilEmployees as fungible

Anything goesBusiness casualFormal dress code

Universal paid time offLimited attendance flexibilityRigid attendance policies

Pay arrangements are open Apps provide an opportunity similar to proxy statement disclosures

Apps provide an opportunity for pay comparisonsPay is secret

Work and play over 24/7: l d t i l

Broad-band allows work to b d t d t id f thWork is performed at the employee determines place

and timebe conducted outside of the employer site

pemployer site

Unions support lack of living wages

Unions on the continued decline

Union prominent for major employers

© MERCER 2015 31

living wagesdeclineemployers

H O W W I L L O R G A N I Z A T I O N S R E S P O N D ?C O M P E N S A T I O N F O R T H E N E W W O R L D O R D E RC O M P E N S A T I O N F O R T H E N E W W O R L D O R D E R

20202015YESTERDAY 2020

Internally-based Externally-based

2015YESTERDAY

Employees as business partners Employees desire fixed payLimited employee risk

Market pay within global levels

Market pay becomes common practice

Base pay linked to internal equity (job evaluation)

Fixed pay is at P25-50 with P50+ i f i blMost organizations target P iti i i t k t P50+ coming from variable cash / equity compensation

g gpay between P25-P75Pay positioning is at market

Significant variable pay opportunity is the norm

Most organizations offer variable pay

Variable pay is limited to executives and sales opportunity is the normvariable pay executives and sales

© MERCER 2015 32

H O W W I L L O R G A N I Z A T I O N S R E S P O N D ?D O - I T - Y O U R S E L F B E N E F I T SD O - I T - Y O U R S E L F B E N E F I T S

20202015YESTERDAY 2020

Company risk Employee risk

2015YESTERDAY

Individual accountability through self-service

Organization role continues to declinePaternalistic

O i ti idC t hifti d Organizations provide group purchasing power without being the sponsor

Cost shifting and abandonment of employee benefits

Organization provided health care, retirement, etc.

401(k) plans with andDefined benefit pension 401(k) plans with and without employer match Defined contributionDefined benefit pension

plans

Opportunity to participate in exchangesConstant cost shiftingHealthcare for employee and

dependents in exchanges gdependents

© MERCER 2015 33

H O W W I L L O R G A N I Z A T I O N S R E S P O N D ?A C T I V E T A L E N T M A N A G E M E N TA C T I V E T A L E N T M A N A G E M E N T

20202015YESTERDAY 2020

Passive talent management Aggressive talent management

2015YESTERDAY

Constant struggle to retain skills and millennials Labor markets tighteningUnlimited supply of talent

Continuous training andContinuous training and development to support EVP

Buy experienced talent New hire training

Well defined lattice career Career progression being Hierarchical career path growth defined Hierarchical career path

Frequent performance assessments with annual Healthy experimentationAnnual performance

management process ratings management process

Leadership is multi-culturalGlobal mobility is encouraged

Leadership reflects home country

© MERCER 2015 34

H O W W I L L O R G A N I Z A T I O N S R E S P O N D ?D I V E R S I T Y A N D P A Y E Q U I T Y A R E R E A L I T I E SD I V E R S I T Y A N D P A Y E Q U I T Y A R E R E A L I T I E S

20202015YESTERDAY 2020

Good idea Mandatory practices

2015YESTERDAY

Employers match the multi-cultures that they serve

Organizations struggle to meet goals

Diversity goals in most organizations

Analytics drives good decision makingExperimentation is rampant Employers don’t know how to

develop diverse talent

Pay fairness is assured Pay inequality is a leadership Pay equity is afterthought through analyticsconcernPay equity is afterthought

© MERCER 2015 35

D E V E L O P I N G A T O T A L R E W A R D S 2 0 2 0 S T R A T E G YT H E R I G H T Q U E S T I O N S

• What are workforce needs in terms of structure, behavior, capabilities• Can the rewards programs designed

to support the desired strategy be

T H E R I G H T Q U E S T I O N S

of structure, behavior, capabilities and performance?

• How should the rewardsprograms be designed

to support the desired strategy be provided at an AFFORDABLEand SUSTAINABLE cost?

If t h h ld th programs be designed and delivered in order to secure those workforce

OUTCOMES?

• If not, how should they be modified to be financially viable?

COSTPERSPECTIVE

EMPLOYERPERSPECTIVE

• What does or shoulddiff ti t it f

• What are the labor and related rewards EMPLOYEEEXTERNAL differentiate it from

competing employment opportunities?

H d l l

and related rewards environments in which the COMPANY COMPETES?

EMPLOYEEPERSPECTIVE

EXTERNALPERSPECTIVE

• How do employees place VALUE on the current rewards

package? • How do they influence or

constrain rewards practices that the company may wish to adopt?

© MERCER 2015 36

W H A T Y O U C A N D O T O P R E P A R E T O M A N A G E T O T A L R E W A R D S I N 2 0 2 0T O T A L R E W A R D S I N 2 0 2 0 D E V E L O P I N G A T O T A L R E W A R D S S T R A T E G Y : S A M P L E B L U E P R I N T

Compensation Benefits Careers

BASE PAY ANNUAL INCENTIVES

LONG-TERM INCENTIVES

GROUP BENEFITS RETIREMENT PERQUISITES PERFORMANCE

MANAGEMENTWORK/LIFE BALANCE

WORKFORCE PLANNING/

CAREERINCENTIVES INCENTIVES BENEFITS MANAGEMENT BALANCE CAREER PATHING

ROLE OF REWARD

Attract and retain; reward

Reward individual,

business unit Link to

shareholder Personal risk management

Wealth acc m lation

Tax efficienc

Goal setting/acco ntabilit

Compelling place to ork

Adequate supply of

ELEMENT building skills

and corporate performance

value creation management accumulation efficiency accountability place to work pp ytalent

COMPETITIVE POSITIONING

25th percentile

Base + STI = 75th percentile

Base + STI + LTI = 90th

Leading edge design;

50th50th

percentileMarket

practicesSupport “build” talent strategy

Environment difficult tomatch by

Balance pay and benefits with careerPOSITIONING percentile 75th percentile percentile 50th

percentilepercentile practices talent strategy match by

competitorswith career

opportunities

IMPACT OF POSITIONING

Risk tolerance

Performance orientation

Rewards long-term growth

Desirable employer

Facilitate orderly

retirement

Employment brand

Focused efforts

Attraction and retention of

qualified staff

Support “build” talent

strategy

METRICS

Acceptance rate

turnover; appropriate

skills

Business results

Stock price growth

Cost and value

delivered

Retirement income

adequacy; financial

management

Cost; commitment

index

Scorecard results

Commitment index;

turnover

Percentage of outside

hires

© MERCER 2015 37

g

Y O U R O P P O R T U N I T Y T O D R I V E T H E B U S I N E S S

• Focus on people, the last frontier for building a sustained competitive advantage

Approach the f t re of Total Re ards based on abilit to infl ence desired• Approach the future of Total Rewards based on ability to influence desired outcomes in terms of retention, engagement, productivity and results

• Make holistic decisions based on your specific situation, considering pay, y p , g p y,benefits, careers, and work/life

• Utilize fact-based predictive modeling for decision making

• Go beyond what others are doing – company-specific best fit vs. best practices

• Communicate what is important

• Define Total Rewards program governance to ensure consistent application of policies and proceduresapplication of policies and procedures

© MERCER 2015 38

QUESTIONSQUESTIONS

© MERCER 2015 39

PRESENTER BIO

© MERCER 2015 40© MERCER 2015 40

S E A N M A C H A L EP R I N C I P A L

Present Responsibilities

Sean is a Principal consultant and the Talent Office Leader for Mercer’s Atlanta Talent team with over 16 years experience in

P R I N C I P A L

Sean is a Principal consultant and the Talent Office Leader for Mercer s Atlanta Talent team, with over 16 years experience in compensation consulting. Sean assists local, multi-national and global clients with a variety of executive and broad based compensation issues including: strategic pay and reward program design, competitive assessments, job evaluation, and pay structure evaluation and development.

ExperienceExperience

From 1998-2007, Sean managed his own boutique compensation consultancy in Dublin, Ireland, focusing on client consulting opportunities in Executive Compensation, across both public and private sectors in Ireland. He published a number of highly respected compensation surveys on executive compensation in Ireland and Europe, including “Executive Salaries & Fringe Benefits in Ireland” (1999 2006)Benefits in Ireland (1999-2006).

In 2007 he joined PricewaterhouseCoopers in Ireland, and managed a variety of human resource and compensation projects, for major clients of the firm across pharmaceutical, financial services and manufacturing sectors, including Coca-Cola, Pfizer, Eli Lilly, Boston Scientific and Allianz Insurance. He also developed PwC’s human capital metrics offering and launched the first survey ofit ki d i I l dits kind in Ireland.

Education

Sean has a BA in English and history from University College Dublin. He is a member of WorldatWork and the Atlanta Area C ti A i ti H h l b t l t ti ti i t th H RCompensation Association. He has also been guest lecturer on executive compensation issues to the Human Resource Management module in the Michael Smurfit Business School, Dublin, Ireland.

Tele: 404-442-3166

E il h l @

© MERCER 2015 41

Email: sean.machale@mercer.com

© MERCER 2015 42