Keeping Pay Adjustments In Perspective

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In a 2013 overview of the state of compensation, Steve Bruce, contributor to HR Daily Advisor, makes a less than rosy comparison of where businesses stand today versus where a full economic recovery would have put businesses in terms of their compensation options. Employment overall is up and voluntary separations are beginning to increase, but for businesses looking to attract and retain top performing employees, rewarding these individuals through traditional compensation methods remains a challenge.

With merit increases averaging right around 3% according to World at Work, and several local surveys also pointing to the 3% mark, Bruce suggests that in fact, 3% may be the new norm. While it may not seem like much on paper, it is worth noting that 2012 was the first post-recession year that pay adjustments, merit based or not, hit that 3% threshold. At the macro level, 2012 also saw the percentage of Northeast Ohio organizations predicting at least some pay increase to 89%, a significant recovery in comparison to the all time low of 45% in 2009 (2012 ERC Pay Adjustment & Incentive Practices Survey).
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3 Pay Problems Most Companies Face And How to Solve Them

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Pricing new and highly specialized jobs, salary discrepancies between sources, and making pay adjustments based on mixed rates of salary growth are three common compensation problems many companies are facing. Here's how to resolve them.

Pricing new and highly specialized jobs

New and "hybrid jobs" are increasingly being added to workforces and often include unique and highly specialized IT, marketing, and technical positions (i.e. Social Media Manager). Employers find that current compensation information sources may be limited because do not have specific pay data that directly match the job and are challenged in setting a competitive salary.
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Executive Pay: The Power of Indirect Incentives

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In a PricewaterhouseCoopers study of 1,106 individual executives across 43 countries, researchers found ample evidence to suggest that the effectiveness of executive pay hinges not only on a total dollar amount, but also on several key intangibles. Despite much focus on variable pay as a key element of executive total rewards packages, the PwC study reports that as a performance driver, variable pay is only a part of the story.

Instead, for this group of executives, their motivation to excel at work appears to stem from a combination of factors including, perceptions of fairness, job satisfaction, recognition and of course, to some degree, the final dollar figure. For example, when asked how much of a cut in pay they would be willing to take if offered their “ideal job”, on average, participants indicated that they would take a cut of up to 28% for the opportunity to pursue a more personally fulfilling job. However, it should be noted, that when asked the same question for someone beside themselves, their threshold for pay cuts was significantly higher in this less personal hypothetical scenario- with some breakouts as high as 70% and averaging at a 60% pay cut.
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To Pay or not to Pay Interns?

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It's that time of year again. Time to start thinking about hiring an intern to build your business' talent pipeline or support some special projects. As you start to begin the hiring process for an intern, you may be asking: should you pay or not pay the intern? If you do pay them, you may be wondering what should you pay interns to be competitive?

To Pay or Not to Pay Interns

Back in 2010, the Department of Labor released guidelines for internship programs under the Fair Labor Standards Act as well as a Test for Unpaid Interns. According to these guidelines, unless your intern meets all of these factors, e.g., the internship is mainly educational in nature and doesn't benefit the organization, they should be paid. As a result, we recommend playing it safe and paying your interns since most internships do not comply with all of these criteria. In fact, there have been a few recent cases where former interns have sued their companies over unpaid work.

Beyond legal consequences, however, from a talent attraction perspective, talented interns (especially in technical fields) can be in high demand. Paying them helps make the internship more attractive and eliminates a reason to not select your organization for an internship. With so many students seeking internships and a limited supply of technical talent, it's best to pay.

Plus, if your organization is using interns to grow a talent pipeline and has plans to hire the intern as a full-time employee following their internship, it's always a good idea to pay them. It shows that you are willing to make an investment in your intern and not trying to take advantage of their work.

What to Pay Interns

If an intern is considered an employee and is to be paid, you need to comply with minimum wage and overtime provisions when determining what to pay interns. Generally, however, interns are paid more than minimum wage. Compensation usually varies for interns based on their major, degree type, and role. Like employees, differences in pay rates usually stem from skill and labor demand. Across national and local pay studies of interns, here are a few general trends:

  • Engineering interns are one of the most highly paid types of interns, typically earning between $15.00-$18.00 per hour.
  • Information technology/computer science interns are also one of the highest paid types of interns, earning between $12.00-$17.50 per hour.
  • Accounting interns are paid higher generally than other types of interns and earn between $12.25-$15.00 per hour.
  • Research, general business, marketing, health, HR, communications, and social sciences interns, generally earn lower pay as interns, usually between $11.00-$15.00 as their skills are in less demand.

Don't forget that benefits are also part of interns' compensation. Close to one third of local employers do not offer any benefits to interns, but the widespread majority offer at least one perk. Interns are often offered these four benefits:

  • Paid time to attend the organization's social events or networking events
  • Rewards and recognition
  • On-site perks such as a cafeteria or fitness center
  • Training, development, and mentorship

Some organizations even offer interns paid holidays, credit towards benefits for time worked if hired after graduation, performance incentives, subsidized parking, and 401(K) - though these benefits generally aren't common.

Interns are a unique segment of the workforce and similar to employees, it's always a good practice to benchmark your pay rates, benefits, and employment practices for interns to see how they compare with other employers. Make sure you're paying fairly and competitively with other employers in the region. Otherwise, you could lose out on some exceptional young talent to your competitor next door.

View the Intern & Recent Graduate Pay Rates & Practices Survey

This survey reports data from Northeast Ohio employers about their internship and recent graduate employment and pay practices.

View the Results

Employers Tend to Pay Shift Employees More

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Employers Tend to Pay Shift Employees More

The results of the 2011 ERC Pay Differential Survey show that Northeast Ohio employers tend to pay shift employees more than non-shift employees, specifically those that work second and third shifts.

Sixty-six percent of employers offer shift differentials for second shifts on weekdays and 55% provide shift differentials for third shifts on weekdays.

Organizations typically provide a flat premium amount per hour as a pay differential, and on average, provide a larger pay differential to employees working weekday third shifts than employees on weekday second shifts.

Employers reported providing the largest pay differential to production, maintenance, and service leads or group leaders on both weekday second and third shifts.

Employees in non-standard shifts experience more challenges such as disrupted sleep cycles, difficulties maintaining family routines, and less social exposure than weekday first shift employees.

As a result, pay differentials are a useful tool that employers can use to incent employees to work second and third shifts or recruit employees for these roles.

View ERC's Pay Differential Survey Survey Results

This survey reports on common pay differentials from Northeast Ohio employers for hourly employees, including shift differentials, lead premiums, overtime, and on-call pay practices.

View the Results

Professional Services Employers Tend to Pay Higher Increases

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According to the 2011 NorthCoast 99 Winners Report, pay increases vary considerably by industry, as does the amount in which those increases are differentiated by performance.

The report shows that winners in professional services industries reported higher increases for 2010 than those in manufacturing, distribution, transportation, health care, and non-profit industries.

Specifically, winners in marketing, technology, and architectural services industries reported providing average increases of 7.8% to top performers – the highest increase reported of all of the industries. Winners in finance, legal, and management services industries also reported above average increases for top performers of 7.3%. These industries also reported higher pay increases across all of their employees as well as for average performers.

Winners in professional services industries also reported more differentiation of pay increases across performance levels. Winners in marketing, technology, and architectural services industries reported an average difference of 4% between top and average performers’ pay increases and 6% between top and bottom performers’ pay increases.

Similarly, winners in finance, legal, and management services industries reported an average difference of 3% between top and average performers’ pay increases and 6% between top and bottom performers’ pay increases. Winners in non-profit and health and human services industries reported the lowest differences in pay increases across performance levels, suggesting that they are less likely to significantly differentiate compensation increases by performance.

View ERC's Wage & Salary Adjustment Survey Results

The survey reports data from Northeast Ohio organizations regarding their actual and projected wage and salary adjustments.

View the Results

5 Pay Trends You Need to Know

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If your organization is in the process of determining compensation for the rest of 2011 and budgeting for 2012, here are 5 important pay trends that you should know related to salary increases and bonuses.

1. Employers are planning salary increases.

The percentage of employers planning salary freezes continues to decrease from 2009, and the number of organizations projecting salary increases continues to rise. In fact, research shows that 82% of employers are providing increases in 2011 and 89% are projecting increases for 2012. This compares to only 55% in 2009 and 59% in 2010 and is approaching 2008 levels when 90% of employers gave increases. These findings are consistent with other national studies which suggest that salary freezes are on the decline.

2. Average salary increases continue to be modest.

Although more employers are planning increases than in the past, they will be modest, hovering around 2.8%-2.9%, which are the average projected increases for 2011 and 2012 cited by numerous surveys. Nonetheless, increases are approaching 3% and some organizations are even exceeding 3%, although very few organizations are budgeting more than 4%. Most compensation experts, however, believe that 3% will be the new 4%. These projections and insights are common across not only our local findings, but also those of WorldatWork, Aon Hewitt, and Towers Watson.

3. Few organizations are recovering pay.

Another trend that has been consistent across numerous compensation budget studies is that few employers are reporting high recovery increases to boost employees’ pay to market levels in spite of their pay freezes over the past few years. Because of this trend, employers may be faced with challenges in retaining employees and especially top talent. This year, studies have shown an uptick in employees dissatisfied with their organization’s compensation practices, especially among those organizations that have not provided increases over the past few years.

4. Merit increases remain the most common.

Merit increases continue to be the most common type of increase provided by organizations, according to most compensation studies, and are differentiated by performance level (by approximately 1.5-2%). Top performers can typically expect increases of 4-5% on average; however, this varies widely by industry. Cost-of-living and across-the-board adjustments are less common, but still used by some employers.

5. There is a positive outlook for bonuses.

Not only are employers continuing to offer bonuses, but they also are more able to fund them. A study conducted by Towers Watson shows that many organizations are experiencing stronger performance in terms of profits and as a result, they expect that annual bonuses will be fully funded in 2011. Bonus trends for 2011 seem to be more positive for many organizations compared to the preceding years. Additionally, other pay for performance trends remain strong including differentiation of merit increases. 

Overall, many studies indicate that the outlook for pay is moving in a positive direction with fewer salary freezes, slightly higher pay increases, and more funding for bonuses. Nonetheless, market adjustments continue to be an area where many employers are lagging and should keep in mind the possible detrimental effects of not recovering pay from salary freezes.

View ERC's Wage & Salary Adjustment Survey Results

The survey reports data from Northeast Ohio organizations regarding their actual and projected wage and salary adjustments.

View the Results

Employers Project Pay Increases of 2.8% for 2012

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The results of the ERC Wage & Salary Adjustment Survey show that Northeast Ohio employers had projected pay increases of 2.8% for 2012. The survey also reports that employers provided actual pay increases of 2.8% in 2011.

Despite no change in the projected average pay increase from 2011, the results of the survey found that more local employers were projecting wage and salary increases than in the years following 2007. Specifically, 89% of the 129 employers surveyed reported projecting pay increases to at least one employee group, up from 55% in 2009 and 82% in 2011.

More employers also projected increases of 3.0% or higher in 2012 when compared to 2011. In the survey, 57% of organizations reported projecting increases of 3.0% or higher in 2012 for clerical, technical, supervisory, management, and professional employees compared to 50% of organizations in 2011. Non-manufacturing employers, in particular, were more likely to project increases of 3.0% or higher for 2012.

View ERC's Wage & Salary Adjustment Survey Results

The survey reports data from Northeast Ohio organizations regarding their actual and projected wage and salary adjustments.

View the Results

Most Maintenance Jobs See Pay Increases

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According to the 2011 ERC Wage Survey and the 2011 ERC Salary Survey, the majority of maintenance jobs surveyed have experienced pay increases since 2009. Both hourly and salaried maintenance jobs showed consistent rises in pay from 2009.

Maintenance Jobs with Hourly Rate or Salary Increases from 2009
Hourly Jobs

 

2009

2010

2011

Janitor/Custodian

$11.76

$11.85

$12.68

Machine Maintenance Mechanic - Senior

$20.02

$19.53

$21.00

Machine Maintenance Mechanic - Junior

$17.50

$18.21

$20.40

Maintenance Electrician - Senior

$21.64

$22.30

$22.77

Maintenance Electrician - Junior

$18.40

$18.66

$25.68

Maintenance Worker - General

$16.49

$17.90

$18.59

Source: 2011 ERC Wage Survey

Salaried Jobs

 

2009

2010

2011

Facility Maintenance Manager

$62,980

$65,046

$70,835

General Supervisor – Maintenance/Trades Function

$48,969

$63,247

$66,897

Supervisor – Custodial Services

$33,262

$33,434

$45,464

Supervisor – General Maintenance

$54,216

$55,828

$59,030

Source: 2011 ERC Salary Survey

For more information about our ERC Wage Surveys, please click here, or for more information about ERC Salary Surveys, please click here

Preliminary Findings: Intern & Recent Grad Survey

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The preliminary findings of the 2011 ERC/NOCHE Intern/Recent Grad Pay Rates & Practices Survey show several trends in intern and recent grad employment and compensation practices.

  • Over 70% of employers plan to increase or maintain the number of interns they employ, consistent with trends seen over the past three years.
  • 68% of employers are in the process of hiring or have plans to hire new college graduates this year.
  • Organizations are increasingly using interns and new graduates to develop their talent pipeline rather than using them for simply workforce support and special projects.
  • Nearly three-quarters of employers say that they offer at least some of their interns employment after the internship.
  • Work experience is becoming an even more crucial criterion for employers when hiring interns, rising in importance from years past.

View the Intern & Recent Graduate Pay Rates & Practices Survey

This survey reports data from Northeast Ohio employers about their internship and recent graduate employment and pay practices.

View the Results