Total Rewards 'State of the Union': Top Trends, Challenges and Recommendations for the Coming Year

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Speakers: Alison French, CCP, GRP Market Segment Leader, Compensation, IBM Deb Nielsen, CCP, GRP Director of Compensation Research, IBM Rena Rasch, Ph.D. Research Manager, IBM

Moderator: Ladan Nikravan Senior Editor, Workforce magazine

Total Rewards 'State of the Union': Top Trends, Challenges and Recommenda;ons for the Coming Year

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Ladan Nikravan Senior Editor Workforce magazine


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Alison French, CCP, GRP Market Segment Leader, Compensation IBM


Deb Nielsen, CCP, GRP Director of Compensation Research IBM

Rena Rasch, Ph.D. Research Manager IBM

© 2013 IBM Corporation

IBM Smarter Workforce

Agenda

•  Macro forces - The economy and legislative climate

•  Trends and Forecasts - What are reward professionals doing this year?

•  People Matters - What are employees and managers thinking about?

•  What does all this mean for 2014?

9



Top areas of concern

Source: Kenexa Compensation Outlook Survey, 2014 10

CONCERNS THAT MAY IMPACT COMPENSATION AND HIRING

53%

39%

38%

16%

10%

7%

43%

55%

57%

72%

76%

73%

4%

5%

5%

12%

13%

20%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Scarcity of talent

Regulatory changes

Broader economic conditions

Social networking

Unemployment rates

Outsourcing/Offshoring

More concernedNo changeLess concerned



Big news…

Source: Kenexa National Salary Budget Survey, 2013

11



Increase budgets in the U.S. have bottomed out in 2009. Though the rebound is yielding increase, salary budgets are still below the pre-recession levels

“For the first time since 1980, the U.S. rate of inflation is higher than the average total salary budget increase”

WorldatWork – August 2011

More on increase budgets

2008 2009 2010 2011 2012 2013 2014

Kenexa Compensation 3.0% 3.0% 3.0% 3.0%

IPAS 3.9% 1.1% 2.5% 3.2% 3.2% 3.0% 3.0%

Buck 2.9% 2.9% 2.7% 2.8% 3.0% 3.0%

Conference Board - - 2.5% 2.5% 3.0% 3.0% 3.0%

Mercer - - 2.7% 2.9% 2.9% 2.9% 2.9%

Towers Watson 3.4% 1.7% 2.8% 2.7% 2.8% 2.8% 2.9%

WorldatWork 3.8% 1.9% 2.8% 2.9% 3.0% 3.0% 3.0%

12



Certain HOT Jobs continue to outpace the market, exceeding the overall market average of 9% in the 5 years

between 2007 and 2012

Hot jobs

Job Title Change Long Term Care Executive 27.1%

Certified Occupational Therapist Asst 25.7% Hardware Engineer III 20.3% Chemical Engineer III 19.4%

Staff Nurse - Surgical First Assistant 17.4% Nurse Practitioner 17.2%

Certified Nursing Assistant 16.4% Network Administrator 15.1% Software Engineer III 14.7%

Source: CompAnalyst benchmark database 13



Job Title Change Accounts Receivable Manager 2.9%

Administrative Services Supervisor 1.5% Communications Representative III 2.1%

Facilities Manager 2.3% Financial Analyst II 4.7%

Mainframe Programmer II 2.9% PC Maintenance Technician II -6.5%

Others jobs aren’t so lucky, significantly lagging the 9% average over the last 5 years

Not-so-hot jobs

Source: CompAnalyst benchmark database

14



15

Job openings and unemployment Pay for Performance: A Clear Signal for Retention and Engagement



Attrition



Economic environment concerns

§  Are we emerging from the economic down turn?

§  What kind of turnover might we face?

§  Will we be able to retain top performers?

17



Department Of Labor budget

§  Hundreds of new enforcement staff have been added to the DOL

§  2014 DOL budget –  $12.1 Billion versus 2013 $ 12.0 Billion –  Nearly $14 million to combat the misclassification of workers as

independent contractors –  An additional $3.4 million for the Wage and Hour Division to

support greater enforcement of the Fair Labor Standards Act and the Family and Medical Leave Act

–  An increase in 61 FTEs for WHD alone

18



More regulatory concerns

§  Impacts of the Affordable Care Act as the employer mandate looms

§  Home health care exemption status change

§  OFCCP and EEOC are deploying more compliance resources with a focus on pay equity

§  Potential changes to overtime regulations

19

“I hereby direct you to propose revisions to modernize and streamline the existing overtime regulations.”

--President Barack Obama to Labor Secretary Perez, March 13, 2014



Compensation Outlook 2014

20



Reward program funding

PERCENT OF ORGS INCREASING FUNDING VERSUS PREVIOUS YEAR

23%

28%

37%

28%

23%

20%22%

24%25%

35%

22%

26%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2011 2012 2013 2014

PE

RC

EN

T O

F O

RG

AN

IZA

TIO

NS

Healthcare Merit Increases Bonus

PERCENT OF ORGS INCREASING EMPLOYEE SHARE OF HEALTHCARE COST

27%

43% 45%

15%

67%64%

51%

23%29% 44%

45%

16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2011 2012 2013 2014P

ER

CE

NT

OF

OR

GA

NIZ

AT

ION

S

Deductibles Employee Contributions Co-Pays/Co-Insurance




Staffing


NET CHANGE IN STAFFING LEVELS, YEAR-OVER-YEAR

42%

44% 45% 45%49% 47%

37%35%30%

29%

25%27%

14%14% 15%

0%

10%

20%

30%

40%

50%

60%

2010 2011 2012 2013 2014

PERC

ENT

INDI

CATI

NG C

HANG

E

Increase No Change Decrease



Reductions


47%

60%

27%

29% 29%

27%

0%

10%

20%

30%

40%

50%

60%

70%

2009 2010 2011 2012 2013 2014

% o

f res

pond

ents

indi

catin

g R

IF



Will they stay or will they come?


71% 73%

15%16%

15% 11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Retaining high performers/critical functions Attracting quality new hires

UnpreparedNeutralPrepared



Compensation challenges

§  Big data and analytics

§  Generational issues/baby boomer

retirement

§  Automation/Technology

§  Decentralization/remote workforce

§  Regulation

§  Skills scarcity

§  Economy/volatile markets

§  The influence of HR in

implementing change

§  Pay for performance

§  Modest merit and HR budgets 25

Prepared Neutral Unprepared Succession planning 45% 24% 30% Baby boomer retirement 35% 38% 27% Increasingly remote workforce 34% 39% 27% Engaging the next generation of workers 45% 29% 26% Automating Comp & HR processes 52% 24% 23% Leadership development 56% 23% 22% Social networking 45% 34% 21% HR analytics 52% 27% 21% Aligning pay with performance 61% 20% 19% Big data 37% 44% 19% Globalization 32% 51% 17% General employee engagement 64% 22% 14% Economic uncertainty 48% 41% 12% Containing healthcare costs 70% 23% 7%



Compensation & communication




Managers




Executive compensation

§  European decisions relative to Say on Pay and new focus on how

much is too much

§  Say on Pay’s influence on the board of directors

§  Stronger executive pay disclosure

§  Better linkage of pay to performance

§  Shift from use of time to performance-based equity

§  Additional definitions of what annual pay means

§  Debates over peer group use

§  Passage of requirement to disclose ratio of CEO pay to average

employee

28



How Managers and Employees Feel

29



Pay fairness over time

Notes: WorkTrendsTM U.S. only. * Data were not collected in 2006, so mean across all years was used.

30



Perception matters

Notes: WorkTrendsTM 2013 U.S. only. 31



Drivers of fair pay




Building belief in pay fairness

Notes: WorkTrendsTM 2013 U.S. only. Values are relative weights.

33



Current perceptions




Communication breakdown




How well are raises and bonuses handled?




How well raises and bonuses are handled impacts perceptions of pay fairness.


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Total Rewards 'State of the Union': Top Trends, Challenges and Recommendations for the Coming Year