The Best Solution to Managing Salary Costs

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Like most employers, you’ve probably been faced with the challenge of how to manage rising salary increase budgets, reward high performers, and sustain your organization’s financial health by meeting and exceeding margins achieved in past years. How do you manage these critically important yet competing demands? The best solution is to develop a variable pay program.

Variable pay: A solution to base pay management

Variable pay is one of the best solutions to confronting the problem of base salary increases. It is much less expensive to manage than annual base pay merit increases, doesn’t compound salaries over time, and can deliver meaningful rewards and additional compensation to employees without long-term hits to your margins.

Generally, it takes approximately $5 of variable pay to deliver the same financial effect of a one dollar salary increase. Additionally, base compensation costs account for about 20-25% of your revenue, whereas variable pay costs account for about 3-4% of your revenue (on average). As a result, variable pay can be a huge savings for any employer.

Executing variable pay: Paying for performance

Fundamental to variable pay is the issue of pay for performance. Variable pay requires differentiating pay by some factor, usually individual and/or company performance.

This means differentiating pay by performance and allocating all (or most) of your organization’s pay rewards to your highest performers and reducing rewards for your average or bottom performers. It also means that additional pay is entirely dependent on how your organization performs, which can ensure that your organization’s financials remain healthy and that financial performance targets are met year over year.

The trouble with pay for performance is in the execution. For it to work, you need a culture that rewards high performance; standard performance management systems which give employees the insights, tools, support, and clarity they need to reach their goals and managers the tools to evaluate and objectively compare performance; as well as meaningful payouts.

Here are proven best-practices for executing variable pay when it comes to managing these issues related to culture, performance, and payouts:

Culture

  • Types of variable pay offered match the culture. For example, strong emphasis on teamwork = team-oriented variable pay.
  • Leaders support a performance-oriented workplace and encourage rewarding “A-players.”
  • Tenure, attendance, and other non-performance related factors are not considered when making decisions about pay, rewards, or promotions.
  • Pay for performance is widespread. Everyone has the opportunity to earn more pay based on their performance – not just execs, managers, and sales staff.

Performance management

  • Goals are clear and achievable. Employees understand how to accomplish their targets.
  • A manageable number of targets are given – ideally 1 to 3 important goals.
  • Accurate measures of performance are intact and not subject to extraneous factors.
  • Performance is regularly tracked, monitored, and well-documented.
  • Performance is well-managed. Employees are coaching, re-directed, and assisted in reaching targets.

Payout

  • Payouts are substantial enough to be perceived as beneficial, motivating rewards.
  • Differentiation of pay and/or rewards is enough to be meaningful for high performers. Strive for 2 times the average payout to reward your highest performers.
  • Tiers for payouts are set to reward employees for meeting minimum goals as well as stretch goals.
  • Minimum and maximum thresholds for targets and payouts are provided.

Variable pay programs are promising and highly effective. If your organization is challenged in sustaining its annual merit increase program and controlling base pay costs, variable pay can be an advantageous solution. Just keep these best practices in mind before designing a variable pay program to ensure that the program is successful and delivers results.

Additional Resources

Performance Management Services ERC can support performance management initiatives through performance management system development, performance review form development, competency development, consulting on performance management issues, performance management/goal-setting training for employees and supervisors, and more. 

Most Companies Can Benefit From a Plan Audit

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401(k), 403(b), pension plans and health insurance plans are wonderful perks to offer employees. But, many companies don’t understand the compliance required by the Department of Labor (DOL) and the Internal Revenue Service (IRS) that goes along with offering these benefits to employees.  The DOL and IRS have various filing and audit requirements that are applicable to these types of plans. Understanding what they need is imperative in making sure the plans maintain their tax-exempt status. 

When is a benefit plan audit required?

As a general rule – most benefit plans are required to file a Form 5500 (Annual Return/Report of Employee Benefit Plan) on a yearly basis. The amount of information included on the Form 5500 will vary depending on the type of plan in place.  If a plan has over a certain number of employees, they may need to have an annual audit of their plan performed, as well.

What actually triggers the plan audit requirement is the number of eligible employees a company has. Generally, when a company has more than 100 eli­gible employees, an annual audit is re­quired. However, you can’t just count all the people participating in the plan to determine whether or not you need the audit; you need to take into consideration eligible employees, as well. Eli­gible employees are those currently par­ticipating plus those who elected not to participate in the plan.

Companies with less than 100 eligible employees only need to file the Form 5500 as a small plan; they do not need an audit. But, companies with more than 100 eligible employees have to file the tax return along with the annual audited financial statements.  There are also certain exceptions for some types of plans with less than 100 eligible employees, stating that a Form 5500 is not required to be filed at all.

The due date of the filings for both the Form 5500 and audited financial statements relates to the due date of the Form 5500. For a calendar year-end plan, the Form 5500 should be filed by July 31, 2012. They also have the option to file for an extension, which gives them until October 15, 2012. Typically, April or May is when companies start to get questionnaires and draft Form 5500s from their third party administrators. This is a good time to address the audit requirement question.

The DOL imposes strict financial penalties when the Form 5500 either isn’t filed at all or is filed im­properly. These penalties are assessed per day and can be as high as $50,000 per report, per year for a deficient filing.

 

If an annual audit is required, what’s next?

The next step would be to find a firm to perform the audit work. Many com­panies look at the firm that does their annual accounting and tax work to see if they perform employee benefit plan audits, as well. Some accounting firms have separate employee benefit plan audit departments with dedicated staff; others do not. Once you find a firm to handle the audit, ask questions: How many other plans does the firm handle? Does it handle all types of benefit plans?

There are three types of benefit plans:

  1. Defined contribution plans – one example of which is a 401(k).
  2. Defined benefit plan, where the participants don’t contribute, but the company does — the most common ex­ample of which is a pension plan.
  3. Health and welfare plans – that offer health insurance and disability-type insurance to employees.

Firms that specialize in employee benefit plan audits have dedicated staff that work on the audits and go through specialized training, and have a streamlined audit process. Companies will also want to find out if the accounting firm is a member of the American Institute of Certified Public Ac­countants Employee Benefit Plan Audit Quality Center. They should also ask what the audit process is going to entail. How much as­sistance is going to be required on the company’s part? They should know go­ing forward how much time their em­ployees would spend assisting the firm with getting the audit completed.

Who will be involved on the company side?

Human resources and/or the accounting department will work closely with the au­ditors because they handle payroll and ben­efits and have all the documentation for what people choose to contribute, along with per­sonnel records and payroll information. Those people are the ones who will put the most effort into getting the documen­tation ready for the auditors.

How long does the audit process take?

It depends on how quickly the auditors can get the information. Typically, the actual fieldwork, where the firm is on-site reviewing original documents, takes anywhere from a day to a week, depend­ing on the size of the benefit plan. Many times the auditors will leave, but have items they want to follow up on. The whole process – from fieldwork to issuing the financial statements to getting the open items cleared – is usually a four- to six-week process.

The Form 5500 and annual audit process can be confusing for those that are new to the process or for those that don’t fully understand all of the compliance requirements that go along with operating the plans.  It really makes sense to talk to a specialist to make sure all of the plans are filing the appropriate documentation on a yearly basis.

Source: Gisondo, D. (2012). Skoda Minotti

Exclusive! ERC member companies can receive their 2011 Benefit Plan Audit at no cost and Lock in their 2010 Rate for the Next Five Years. Click for more details on Benefit Plan Audits, or contact Dani Gisondo at 440/449-6800.

Survey Reports National & Local Compensation for Sales Representatives

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The recently published 2012 EAA National Sales Compensation & Practices Survey, which surveyed nearly 800 organizations throughout the United States, reports national and local total compensation for sales jobs.

In general, the national median total compensation for outside sales representatives in the survey showed significant increases from 2011 - of at least 7% or more. Junior Sales Representatives showed the highest percentage increase from 2011 of all outside sales representatives. The table below shows the national median total compensation reported in 2011 and 2012 as well as the median reported by Northeast Ohio employers in 2012.

Median Total Compensation for Outside Sales Representatives

 

2011 National Median

2012 National Median

2012 NEO Median

Sales Representative/Account Executive - Senior

$90,790

$97,208

$96,114

Sales Representative/Account Executive

$63,643

$70,000

$77,212

Sales Representative - Junior

$42,754

$49,407

$42,397

"It's not surprising that pay for outside sales representatives continues to rise significantly. Employers tell us that sales continues to be an area in which they struggle to attract and retain key talent and our studies show that compensation ranks most important for local top talent in sales roles," says the Director of Research & Membership at ERC.

For more information about the EAA National Sales Compensation & Practices Surveys or to purchase them, please click here.

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

International Sales Managers Earn Higher Salaries in Northeast Ohio & Midwest

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According to the 2012 EAA National Sales Compensation & Practices Survey, which surveyed nearly 800 organizations throughout the United States, employers in Northeast Ohio pay International Sales Managers more than other regions of the United States. Similarly, employers in the Great Lakes region (which includes Ohio) also report paying higher compensation for International Sales Managers when compared to organizations in other regions of the United States.

Specifically the survey showed that employers in Northeast Ohio reported median total compensation of $165,000 for International Sales Managers. This median total compensation was significantly higher than the national median of $128,323.

Total Compensation for International Sales Manager

 

National

Northeast Ohio

Great Lakes Region

10th Percentile

$85,905

$103,000

$88,548

25th Percentile

$102,115

$116,780

$102,750

Median

$128,323

$165,000

$139,722

75th Percentile

$180,552

$184,868

$190,000

90th Percentile

$216,664

$199,155

$221,645

Source: 2012 EAA National Sales Compensation & Practices Survey

The data seems to suggest that employers in Northeast Ohio, as well as those in the general Great Lakes Region, pay their International Sales Managers more than employers in other regions of the U.S.

In general, international competencies are highly in-demand, and employers in our region seem to be paying a premium for global skills - at least for international sales management talent.

For more information about ERC's Surveys click here. Also, ERC members can now access international resources and pay data through our HR Help Desk. Email hrhelp@yourerc.com for more information about these new resources!

Administrative Jobs Experience Slower Salary Movement

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According to the 2012 EAA National Wage & Salary Survey, though administrative jobs experienced salary increases of at least 2% from 2011, most administrative jobs in the survey continue to see slower salary movement compared to other jobs.

Median salaries for Receptionist, Telephone Operator/Receptionist/Secretary, and Administrative Assistant to CEO jobs increased 2% from 2011 to 2012. Administrative Assistants of varying levels saw higher increases of 3%-5%.

Median Salaries for Administrative Jobs

 

2011

2012

% Change

Receptionist

$27,860

$28,474

2%

Telephone Operator/Receptionist/Secretary

$29,095

$29,587

2%

Administrative Assistant I

$31,517

$32,686

4%

Administrative Assistant II

$36,703

$37,831

3%

Administrative Assistant III

$42,380

$44,293

5%

Administrative Assistant to CEO

$47,879

$48,688

2%

Source: 2012 EAA National Wage & Salary Survey

The data from the survey is in line with other trends which suggest that administrative job salaries are rising, but at a slower rate than other jobs which are in higher demand.

 To participate or purchase ERC's Salary & Wage Surveys which report data from Northeast Ohio employers on over 400 jobs, click here.

Salary Talk: Tips for Talking About Pay with Employees

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Salary conversations - such as negotiating an offer with a job candidate, confronting an inquiry about a pay increase from a current employee, or dealing with a complaint about pay - can be uncomfortable and difficult for employers. Pay is personal. It affects employees' ability to pay their bills, support themselves, and provide for their families. Salary matters, however, need to be discussed with objectivity and frankness by managers. HR can help facilitate these conversations in the following ways.

In the case of current employees, meet with managers to discuss employees' performance, tenure, skill set, scope of responsibility, and value to the organization. With job candidates, look at their skill set, scope of responsibility, experience and education, the job's value to the organization, and how other employees with similar skills and backgrounds are paid for the position.  Address how pay decisions will affect the team or department as a whole. Will other employees' pay increases be affected by giving an employee a higher pay increase, or will an increase exceed the range for the position? Is the employee eligible for a promotion or could they be transferred to a role with higher pay? How will the new employee's pay compare to other employees in the position? These are all important issues to consider when discussing pay with current employees or job candidates.

Next, understand the organization's needs, including how the organization is performing. If your organization has a strong track record of success and profitability, it may be in a better position to provide higher compensation or a pay raise. Success generally allows organizations to pay employees better. If performance is lagging or has been variable, it may be advisable to limit compensation costs.  Also, consider what the organization wants to reward and how it wants to pay employees relative to other companies.

Help managers talk about pay. Arm managers with the tools, information, and education to understand what is going on in the market relative to employees' compensation. This requires actually understanding the data yourself in order to communicate those trends back to them. Educate managers on the overall market trends for the positions in their department as well as how other companies of similar industry, size, and location are paying their employees. If your organization is truly paying employees fairly and based on the market, there's no reason not to be transparent with the data. Additionally, train managers on your organization's pay philosophy and compensation systems. Make sure they understand why your organization pays employees the way they do, the many issues that factor into pay decisions, the latitude they have in making decisions about pay (if any), and how to discuss employees' total compensation (i.e. benefits, rewards, etc.). Teach them how to explain to employees how they can earn a pay increase (i.e. gaining a promotion, enhancing skills, improving performance) in the future or provide alternative rewards if pay can't be adjusted. The trick to having pay discussions is to be able to justify your decisions and present options.

On a final note, recognize that compensation complaints are often the symptom of a larger problem in the employee's job or the workplace. Ask yourself if pay is really the issue because compensation is rarely a driver of engagement for happy, passionate, and motivated employees unless pay is perceived to be so unfair that it creates a major problem related to job satisfaction. Keep in mind that it will usually take much more compensation to satisfy an employee who is a poor fit for the job, has a bad manager, or is unhappy in the workplace. It may be worthwhile to explore these areas before considering changing their pay.

Additional Resources

Survey Information
Use ERC's compensation surveys to determine how other local employers are paying employees of all levels, from hourly to salaried to executive jobs. Click here to see our upcoming surveys schedule.

HR University
HR University is a comprehensive course for those who are newer to the HR profession or those who have limited experience or realize it is time for a refresher which covers topics including compensation and benefit plan design, performance management, staffing, and more. Click here for more information or to register for this series which begins April 26th.

Are Execs Receiving the Perks They Used To?

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Executive benefits and perks have undergone quite a bit of change since 2007 and several studies suggest that executives are no longer receiving the breadth of perks they used to several years ago.

A 2011 study conducted by CompData, for example, found a decline in the percentage of companies offering company cars, annual physical exams, and voluntary deferred compensation programs to CEOs from 2009 to 2011.

ERC's data shows similar trends. In analyzing changes to executive perks in our Executive Compensation Survey since 2007, several changes have been noted. Fewer organizations seem to be providing these to their executives, and particularly their CEOs.

Percent of employers offering benefits and perks to CEOs: 2007-2011 comparison

 

2007

2011

 

Mfg

NMfg

Mfg

NMfg

Company cars (company owned or leased)

50.0%

38.1%

43.0%

29.4%

Club memberships (business, social and/or country club)

34.4%

29.5%

28.8%

23.3%

Periodic physical exams

17.9%

12.3%

13.9%

8.1%

Special retirement plans (supplemental pension and/or thrift)

21.1%

23.1%

17.7%

18.7%

Additional life insurance

42.2%

32.2%

38.8%

27.1%

All-expense medical insurance

16.8%

17.5%

13.5%

13.0%

Estate planning

13.7%

7.5%

10.9%

4.6%

Legal counseling

11.8%

6.1%

9.5%

3.7%

Income tax preparation

25.2%

6.1%

16.8%

10.7%

Mfg = Manufacturing employers
NMfg = Non-manufacturing employers

Source: 2007 & 2011 EAA National Executive Compensation Surveys

Does this trend mean that employers should stop providing executive perks? Not necessarily.

Extra benefits and perks should be considered as part of the total compensation package. Perks in lieu of a higher base salary, for example, may be quite beneficial. Similarly, depending on the executive, it may be important to offer some of these perks in order to acquire the right talent.

Also, some benefits may be important to offer for your business' operations. For example, some organizations find it important to provide annual physical exams to their executives to ensure that their leaders are healthy and equipped for the job. Others find that their executives need to be provided with a vehicle or automobile benefits for ease of travel.

The decision to offer executive perks comes down to a few basic questions:

  • Does your organization need to provide special benefits or perks in order to attract executive talent? If so, which ones are most important or necessary?
  • Are other employers in your industry or size offering certain benefits or perks?
  • Can your organization afford to provide special benefits or perks?
  • Which executives will qualify for special benefits or perks?
  • What is the risk in not providing certain benefits and perks?

Finally, it's important to consider that executive positions can be demanding and extra benefits and perks can help increase productivity and support the executive.

To participate in ERC Compensation & Benefits Surveys, which reports executive compensation, benefits, and perks provided by employers, including those in Northeast Ohio, please click here.

Skilled Manufacturing Jobs See Higher Salary Increases than Unskilled

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Pay for skilled manufacturing jobs seems to be rising, according to a 2012 national survey released by ERC. Based on the 2012 EAA National Wage & Salary Survey, several skilled manufacturing jobs (namely supervision) saw higher salary increases than unskilled manufacturing jobs.

Median Salaries for Production Supervisors

 

2011

2012

% Change

Production Supervisor - Unskilled Operation

$50,447

$47,649

-6%

Production Supervisor - Semi-skilled Operation

$53,053

$54,485

3%

Production Supervisor - Skilled Operation

$57,842

$60,982

5%

Trades Supervisor - Production Support

$68,332

$70,184

3%

Source: 2012 EAA National Wage & Salary Survey

The survey reports a decrease in median salary from 2011 for production supervisors of unskilled operations, yet positive increases in median salaries from 2011 for production supervisors of semi-skilled, skilled, and trade operations. In fact, these increases were above the average salary increase of 2.8% in 2011. Employers reported the highest percentage increase (5%) in median salary for production supervisors of skilled operations.

Other data in the survey shows that several unskilled manufacturing jobs, including production workers and laborers, reported modest if any salary increases from 2011. These findings are consistent with local pay trends which show relatively stagnant wages for some manufacturing jobs, particularly unskilled ones.

The findings of this survey are consistent with other local and national trends we've seen, suggesting that skilled manufacturing jobs are in high demand and pay is beginning to reflect this demand. Pay is often a factor influencing retention for employees in the manufacturing sector, so providing above-average or competitive pay rates for manufacturing jobs will be crucial for employers seeking to attract and retain highly skilled manufacturing workers.

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

How to Pay Your Executives

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Executive pay is very different from other compensation practices you administer, involving greater pay-mix complexity, more components, and consideration of various business and legal factors. Here are executive compensation basics that you need to know to drive your business results as well as attract and retain key executive talent.

Create an executive compensation philosophy

Establishing and communicating a formal compensation philosophy for executives is an important part of an executive compensation program. This philosophy should clearly explain the principles on which executive compensation decisions are based and how executive pay programs are driving the organization's needs and strategic goals (Lupo, 2010). Comprehensive documentation of rationale supporting your organization's executive compensation programs is also an important part of your program. Additionally, this philosophy may define who qualifies for executive compensation (typically only the highest paid executives).

Invest time in executive compensation program design

Executive compensation should start with your business's goals and objectives. Define what the strategic objectives of the business are, how the company will define success in 3-5 years, the kind of talent needed to support its business strategy, and how long you want to retain the talent. This strategy will help your organization make decisions on the other elements of executive compensation design including pay mix, performance measures, and pay position relative to the market (Hosken & Laddin, 2011).

Additionally, identify taxes, governmental regulations, and industry trends that affect executives' compensation. All of these issues should play a role in how and what you decide to pay your leaders.

Gather executive compensation market data

Many organizations use market data to establish executive compensation. Choose surveys that are similar in revenue size and industry and whose participants reflect your peer group. Peer groups may be those companies similar in revenue, market, number of employees, or performance. Peer groups could also be companies that you compete with in your industry or for executive talent.

In addition to salary surveys, ERI is a strong data source to use for executive compensation decisions and contains specialized industry data. ERI's data meets expert witness reliability standards and is cited in Sarbanes-Oxley proxy disclosures as a data source used to determine executive compensation. Plus, ERI is relied upon by many private corporations smaller in size. You can also compare your positions to data from the most relevant or comparable public firms using proxy statements.

If your organization is a small to medium sized private company, however, be cautious when comparing your executives' compensation, benefits, and perquisites to only readily available information about public company executives. Only a small percentage of U.S. companies are public and these figures are usually much larger than what executives actually earn at similarly sized organizations (Chief Executive, 2011). For example, in one of our latest surveys, a CEO's median base salary was reported at $203,000 and median bonus was reported at $63,200, which are far lower than figures for much larger public organizations.

Benchmark types of executive compensation pay

Typically five types of pay should be benchmarked to obtain a true picture of how executives should be paid. These include base salary, short-term incentives, long-term incentives, perquisites, and benefits. As a result, a solid survey or source of compensation data should include at least the following information: base salaries, bonuses, total compensation, benefits, and perquisites.  Most organizations that we serve use bonuses (tied to organizational profitability/performance and individual performance) and base salaries for executive compensation.

When analyzing pay, revenue is usually the most common factor used to determine executive compensation because executive pay is directly related to size and revenue of an organization. Using industry can also be helpful, but look first at the revenue breakout. If the survey is smaller in scope, be sure to look at broader industry definitions for the most reliable results. These breakouts will tend to have more data.

Anticipate executive salary increases

Currently, executive salary increases and adjustments have been projected lower than past years. Traditionally, executive increases hovered around 4%, however, most surveys - including those conducted by Mercer, WorldatWork, and ERC show that executives can expect increases of around 3% in 2012. These projected increases, however, are slightly higher than the 2.8-2.9% increases seen since 2009, but do vary according to the position.

Keep in mind that making pay decisions (such as increases) for executives involves considering how those decisions will impact your organization's costs down the road.  A 4% increase for an executive translates to a much larger cost than a 4% increase for a factory employee.

These are just some of the basics of executive compensation that you can use to help determine how and what to pay your leaders. Keep in mind that managing executive pay can be very complicated, depending on your business, objectives, needs and peer group, so be sure to seek expertise in this area or credible market data on executive compensation practices to help you make good business decisions.

Additional Resources

ERC Membership

Members of ERC receive access to national and local salary, pay, and benefits survey data in addition the ERI's Salary Assessor and global pay information accessible through our HR Help Desk (hrhelp@yourerc.com). More info

Compensation Consulting

Our compensation consulting services cover a broad range of assistance on the total rewards spectrum, from basic job description updates to the complete design of organization-wide base salary compensation systems, executive compensation, and variable pay programs. For more information, click here.

Sources:

  • Hosken, E. & Laddin, D. (2011). Best Practices for Executive Compensation. WorldatWork Workspan.
  • Lupo, P. (2010). Top 10 Considerations for Establishing an Executive Compensation Philosophy. Pearl Meyer & Partners.
  • ChiefExecutive.net (2011). Media Wrong About CEO Compensation.