Why Having a Compensation Strategy is a Must

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Why Having a Compensation Strategy is a Must

How much should you pay your employees? Why should you have a compensation strategy? And when was the last time you reviewed your strategy? 

Sue Bailey spends a lot of time thinking about all of these questions. As ERC's Senior Consultant for compensation, benefits and everything in between, Bailey has developed a deep foundation in Human Resources that has been honed over the past 30 years.
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4 Compensation Topics You Can't Afford to Overlook

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4 Compensation Topics You Can't Afford to Overlook

When the word "compensation" is brought up in conversation, most people assume it just refers to what a person is paid. However, to the Human Resource community, the word compensation is a much more complex topic.

We spoke with Sue Bailey, ERC’s Senior Consultant, Compensation & Benefits, about what HR professionals should look at when it comes to the top compensation topics.
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Pay Period Leap Year: Handling 27 Pay Periods

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Pay Period Leap Year: Handling 27 Pay Periods

If the question of, “How will you handle 27 pay periods,” doesn’t sound familiar to you, don’t panic. It may not apply to your organization, or if it does, you still have options. 

If your pay cycle is either weekly or bi-weekly, there is a good chance that some years will include an extra payday, although there is some variation to this rule based on the way the calendar falls and the day on which your organization pays employees.

It is also important to note that the extra payday only creates issues for exempt employees who, unlike their non-exempt counterparts who are paid based on hours worked, receive an equal portion of their annual salary each paycheck.

Finally, before agonizing over how to manage an extra pay period, employers should review any and all documents related to the terms of employment that are currently in place, e.g. offer letters or collective bargaining agreements. Specific wording or clauses in these types of documents may actually be the determining factor for which methods remain on the table.

How to handle the "pay period leap year"

Interestingly, despite the variation in the parameters listed above, one area where there is more consistency among local employers is in how they choose to address the pay period leap year.

When asked specifically how they handle years that have 27 versus 26 payrolls for exempt employees, 81% of respondents to 2014 ERC’s Payroll Practices Survey indicate that they “pay as usual.” This overwhelming response of essentially doing nothing has remained true since 2011 when the survey was first administered. Figure 1 below illustrates the other options employers may turn to:

The “other” category elicited several interesting responses, with more than one employer explaining that while in the past they had chosen to divide pay by 27 and adjust benefit deductions, moving forward they would not be making that same choice. They noted that although logistically this change worked smoothly, employees were displeased with a smaller bi-weekly paycheck and overall morale was negatively impacted.

Other considerations

Although these particular employers did not experience any compliance related issues, employers who choose to divide paychecks by 27 should be aware of any lower wage workers on an annual salary. If the new math puts their pay below the FLSA threshold, this would in fact alter their FLSA exempt status and require the employer to pay overtime, etc to these employees for one year.

Another alternative option, although not at all common, was to simply reduce the final paycheck of the year.

As legal experts point out, this final option can also be dangerous in terms of FLSA as well as state minimum wage laws for any salaried non-exempt employees that might fall under the minimum hourly wage during the final reduced pay period—not to mention the likely backlash and drop in employee morale that could accompany a significantly reduced final holiday paycheck.

Ultimately, no matter which option an organization selects to accommodate a 27 pay period schedule, the key is communication with employees. Clearly if any paycheck along the way is going to be smaller, employees will need to know in advance, but even for employers that do nothing this year, communication is still important. For these employees, an extra paycheck could mean as much as a 4% raise, a raise that will be confined only to that year. So whether your payroll budget is staying the same or hitting an all time high with 4% raises, making sure everyone is on the same page will allow for a much smoother and easier transition into the years beyond.

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

Is IT Salary Growth Keeping Pace with Job Demand?

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Is-IT-Salary-Growth-Keeping-Pace-with-Job-Demand

With much discussion in 2014 over what city will be the next Silicon Valley, it seems as if every job market is trying to get its share of high tech industry investment, and along with the companies, a share of the tech talent needed to make these companies successful.

Locally, the job market is as competitive as ever with a 2014 article from Crain’s Cleveland Business describing several real life scenarios from Northeast Ohio tech companies involving “super crazy demand” for highly specialized skills within IT, recruitment of passive candidates away from gainful employment, and a focus on creating workplace cultures to lure top talent into new companies, just to name a few.

While the subjective influences that may be at play in this seemingly chaotic battle for top tech talent are a bit more amorphous and take time to develop (i.e. creating an appealing brand or organizational culture) there are also key objective facts that can be identified as likely contributors to the competitive and complex nature of the IT job market.
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Raises Remain Steady Among Northeast Ohio Employers

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Post-Recession Pay Adjustments are Stable

With raises over the few years to 2014 holding steady at 3% both locally and nationally, the results of the 2014-2015 ERC Wage & Salary Adjustment Survey came as no surprise - both the actual & projected overall average adjustments in 2014's survey remained at 2.9%. Figure 1 below provides an overview of actual and projected increases in Northeast Ohio since 2004, and more specifically, illustrates this post-recession consistency from 2012-2014 (not to mention the 2.9% increase projected for 2015 in 2014’s survey).

Raises are the Norm

Of the 145 participating organizations that reported data in 2014, only 4% of the total sample indicated that they did not provide raises in 2014 and an equal percentage indicated they also would not be providing raises in 2015. As shown in Figure 2, these figures are right on target with 2013's predictions and have not only fully recovered from the recession, but have actually surpassed pre-recession levels. Ultimately, it seems that although employers are not providing larger increases in terms of percentages, at the very least some pay increase has once again become almost universally expected.
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5 Key Types of Executive Compensation

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5 Key Types of Executive Compensation

Executive compensation plans come in a wide variety of shapes and sizes depending on what business objectives the organization is aiming to achieve, the desired complexity of the plans, the demographics of the organization in terms of size, revenue, and industry/sector, as well as the various legal stipulations that apply to executive pay.

However, many of the basic structural elements of executive compensation are more constant, with variations occurring in terms of strategy and implementation. Below, we provide examples of several of these key types of pay based on the results of the EAA National Executive Compensation Survey.
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Most Employers Offer Pay Incentives, Shift Focus to Short-Term

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short term incentive definition Most-Employers-Offer-Pay-Incentives-Shift-Focus-to-Short-Term

In May of 2014, pay incentives, primarily at the uppermost executive levels, have been seeing quite a bit of negative press due to push-back from shareholders over the size of the incentives, concerns over company performance, and even internal scandals and abuses to artificially inflate the incentive amounts distributed.

From Chipotle to Staples, and now the Veteran’s Affairs Department, the power and perils of pay incentives have been front and center. Of course, most organizations are looking at pay incentives at a much more basic level for the vast majority of their employees and with much more well-meaning goals in mind. Two recently published examples of incentive pay research help to shed light on the current landscape of incentive pay including, which incentive plans are being offered, to whom, and based on what metrics. Key findings from both surveys, one at the national level and one at the local level, are outlined below.
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4 Tips for Reading and Analyzing Salary Ranges

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creating a salary structure

A key aspect of any healthy compensation plan is transparency. Due to the potentially charged nature of pay, very few organizations share the individual rates of pay for each employee, but there are certainly other ways to help your employees understand how and why their paychecks are what they are even if you aren’t quite ready to email your payroll out to the whole office.

One way to do this is to help your employees understand how you are creating a salary structure and where they fall within this structure. Clearly each structure will vary from organization to organization, but here are a few of the basic questions that you may want to address in order to increase transparency.
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Compensation Planning Tips: What is the Median?

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Compensation Planning Tips: What is the Median?

When it comes to compensation planning, one of the most important figures to have on hand is undoubtedly the median or 50th percentile. However, depending on your overall compensation philosophy, you may also want to gather other percentiles along the way, such as the 25th and 75th percentiles.

Of course most compensation surveys don’t stop there, don’t forget weighted averages and employer averages, and of course every demographic breakout you could imagine. But for purposes of this article let’s stay focused on those percentiles. What exactly do they tell us and how should they be used? To help give some context, here are a few quick tips that should help you make sense out of all those numbers.
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Helping Employees with Retirement Transition

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retirement transition planning Helping Employees with Retirement Transition

People can feel overwhelmed when it comes to transitioning to retirement. Many just don’t know how to save or where to start. We spoke with Dave Kulchar, Executive Vice President at Oswald Financial, about what employees can expect and how to not be overwhelmed with their retirement transition.

The most important financial considerations for employees nearing retirement

Individuals need to organize their financials in preparation for retirement. That includes planning, budgeting, and proper asset allocation.
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