There have been headlines in the news lately concerning performance bonuses in the banking and finance industry.  In some cases such as that of Goldman Sachs, lower overall company performance didn’t dampen the pay raises and bonuses significantly last year.  So is there really a connection, and how is “performance” determined?

According to an article in the Society for Human Resources Management (SHRM) news, over 90% of U.S. organizations tie salary increases and bonuses to specific performance measures.  There was a study done by the Institute for Corporate Productivity (i4cp) that found high-performer organizations are more likely to use performance measures than the “low performers”. 

There is also a difference between companies saying they evaluate performance and companies doing so successfully.  Being successful depends heavily on identifying the appropriate drivers to use in the evaluation process, and clearly understanding these drivers.

The SHRM article said that high-performer companies were driven primarily by a desire to recognize and reward their best employees.  This desire also translates into needing to retain their best and brightest at a time when these folks may be a target for other organizations looking for new employees. As a secondary driver, the high-performer hoped to increase the likelihood of achieving corporate goals through their review program. 

In these times of tight budgets, very few of the companies studied identified the compensation budget as a driver for performance evaluations and raises.  During the 2009 downturn there was a general attitude among companies that if you kept your job, even if it meant a salary reduction, everyone was grateful.  Now, slowly, companies are able to give raises and bonuses, and are trying to do so effectively.

Interestingly, the i4cp study found that low-performing organizations put emphasis more on achieving corporate goals (in other words how well did the employee fit into that business vision).  While this might make sense, sometimes the best input you can receive from staff is why the goal/vision needs tweaking, and being able to provide new vision or innovation to achieve success.  Meeting corporate objectives and improving productivity are useful short term goals, but the best and brightest can see the broader picture and help the organization get there.

Tags: benefits, employee morale, performance management

Trends in compensation and benefits are moving slowly upward, according to information and research results from the Society for Human Research Management (SHRM) HR Magazine.  In addition, new grads, if they get hired, are getting better offers from new employers. 
The 2011 Benefits Study from SHRM highlights improvements in benefit offerings, but these are not going to match the types of packages offered pre-2009.  In general the plans are family-friendly, without the “perks” seen in earlier years.
 Organizations spent on average 19% of an employee’s annual salary on mandatory benefits, 19% on voluntary benefits and 11% on pay for time not worked benefits.  In order to remain competitive in the recruiting market, and to maintain employee morale, a summary of the costs and benefits offered in the organization needs to be made available to staff and new hires.

Overall results  from the Benefits Study
- Health savings accounts (HSA) are becoming more and more prevalent, while HMO plans continue to decline in popularity.
- Paid-time off plans are becoming more popular, This method of keeping track of paid absences has always been a favorite of mine, as it rewards those who need less personal time with more vacation, while allowing families to take the time they need to deal with illnesses and management of family issues.
- Over the last year, there was a slight increase in the percentage of companies offering health care premium discounts for employees who had an annual health risk assessment, participated in a weight loss program, participated in awellness program and/or had not used tobacco  products.
- Employer-sponsored retirement plans continue to shift away from defined benefit pension plans toward defined contribution retirement savings plans and Roth 401(k) savings plans. Even though the percentage of companies that offered defined contribution plans continued to increase, there was a slight decline in the percentage of companies that offered employer-matchingcontributions.
• Financial and compensation benefits have experienced considerable declines throughout the last five years. The most significant decreases were in educational assistance programs, incentive bonus plans for executives, life insurance for dependents and undergraduate educational assistance.

The following benefits experienced sharp declines: executive club memberships, legal assistance/services, mentoring programs, organization-sponsored sports teams, professional development opportunities and travel planning services.

Housing and relocation benefits have experienced significant declines over the last five years. These benefits included assistance selling previous home,
cost-of-living differential, down payment assistance, location visit assistance, mortgage assistance, rental assistance, spouse relocation assistance and temporary housing.

On the salary front, there is a slight increase in the starting salaries offered to new grads.  New hire rates are up about 2.8% from the previous year. According the the 38th Annual WorldatWork Salary Budget Survey the key findings for 2011:

• Salary budgets increased by 2.8 percent in 2011.
• Base salary increases were awarded to 88 percent of employees in 2011 vs. 86 percent in 2010, 80 percent in 2009 (all-time low) and 91 percent from 2006 to 2008.
• Across-the-board salary freezes were planned by only 3 percent of employers vs. 43 percent in 2009 and 10 percent in 2010.

“The situation where significant numbers of employees are not receiving any pay increases appears to be over for now,” said Kerry Chou, compensation practice leader at WorldatWork. “However a quick return to pre-2008 budget levels seems unlikely given the modest rate at which budgets are recovering.”

And looking for to 2012:

• Salary budgets are projected to rise by 2.9 percent in 2012.
• Based on individual performance ratings at year-end 2011, low performers can expect an average pay increase of 0.7 percent, middle performers 2.7 percent and high performers 4.0 percent.

Tags: benefits

Keeping you informed!  Just in case you were feeling slighted, a recent survey on pay raises found promotions and raises down significantly.  WorldatWork’s Promotional Guidelines Survey, conducted last fall, focused on promotions because that seemed to be the only way employees could earn substantial pay raises in this economy.  What the survey found was that only 7 percent of the employees in large U.S. organizations received promotions last year, down from the average of 8.1 percent.  The survey also noted that the raises themselves were down considerably.  Officers and executives, the hardest hit, saw raises go from an average 11.4 percent in 2005 to 9.5 percent in 2010.  The problem for companies is that they have to show opportunities for career advancement to keep top performers, thus companies budgeted separately for these increases. 
It seems from other economic news that non-executives are taking pay reductions, or their benefits are being cut.  Overall it is now a waiting game as companies try to manage growth without having to add a lot of employees.  Hang in there!

Smart Phones are also coming to the attention of mobile security experts as more and more business is conducted on these devices.  Hackers are developing malware  to exploit security issues that may include a less-than-optimal browser, user authentication, and data encryption technologies.  According to an item in SHRM News, in 2010 more than 1 million smart-phone users in China were infected with a “zombie” virus hidden in bogus anti-virus programs.  Another case involved a worm connecting infected iPhone devices to a server in Lithuania, enabling criminals to control the phones.  Adding to the problem, according to the January 2011 article, is the bring-your-own-computer movement allowing employees to use their own mobile devices in the workplace, which can infect company servers.  It is up to companies to either disallow the use of those devices as is done in the national laboratories, or to restrict important data so it cannot be accessed through these devices.  If a document has to be emailed the sender needs to strip any identifier info such as social security numbers from the mail.  Hopefully soon the security systems will be upgraded to deal with these issues, as the world is certainly addicted to the Smart Phone!

Tags: benefits, employee benefits, employee morale, industry news, performance management

Most U.S. employees currently relying on a 401K plan will not be able to retire by age 65. A study published by Nyhart’s employee benefits consultancy has come up with some interesting information.  The six-month study looked at retirement accounts from employees at 110 U.S. public and private companies, and found that most employees aged 45 to 55 need to contribute 19% of pay to be able to retire at age 65.  Employees aged 60-64 will probably have to work until age 75 to afford to retire.
The study, based on current contribution rates, found that 81% of employees 18 or older won’t be able to afford to retire at 65.  Also 70% of employees 18-24 aren’t expected to retire by age 65, as 30% of them don’t participate in a 401K. 
The leading cause impacting retirement age is the contribution rate of the employee.  Across all age groups, the greater the contribution rate the better the opportunity to afford retirement.  By increasing the percent contribution by 2-4% of total income, employees can shave years off the age of retirement. 
Another factor influencing the ability to retire is the gender of the employee.  Current stats show that women live longer than men, and so definitely need to save more. 
The economic recession of 2008-2010 had a major impact on employees 55 or older who wanted to retire at 65.  The hardest hit were those 60-64, who will need to contribute approximately 45% of income to retire at 65. 
The U.S. has gone from a country where most large organizations had company-funded defined benefit plans to a n era of varying levels of employee contributions in order to have any retirement options. 
The Society for Human Resources website, www.shrm.org, has pointers on managing 401K’s and other retirement issues. 

Tags: benefits, employee benefits, employee morale, industry news

As manager for a busy OB-Gyn office in another lifetime, I was well aware of the impact of an absent employee.  There were patients to see, charts to manage, billing to be done and suddenly you are one or two people short.  Everything slowed down and other employees were working harder to take up the slack.
In the office most people were well aware of how their absence affected their departments and the practice as a whole, and tried to manage their time accordingly.
The employee with vacation benefits should be able to enjoy time off guilt-free.  If they are truly ill, they need to know their co-workers will be supportive while they are off work.  It is also important that they don’t come to work and infect others, but stay home and get well.  So – how can the employer be prepared to support the employee and their position?
For the employer, one interesting fact is a finding from a Kronos/Mercer study that employee absences, planned or unplanned, cost the company approximately 35% of base payroll.  An article in the Society For Human Resource Management (10/12/2010) talked about the need for employers to better manage these costs.
Some suggestions (and employees might want to think about their role in the process) include being aware of problem signs before unplanned absences occur.  Things such as chronic lateness might signal a health problem.  Complaints of work-related pain or discomfort, such as wrist pain in a computer operator, might warrant further investigation to see if their workplace can be modified to avert more complications.
For planned absences it is worth a supervisor’s time to include the employee in planning for coverage for their position.  Seek suggestions for allocating their chores, and in case of surgery or medical leave offer a modified work schedule to allow them to return more quickly. 
During non-vacation absences it is important to stay in touch with the employee. For all absences make sure that any changes made in their work area are relayed to them before they return. 
Managers have the difficult task of keeping their work unit running smoothly while having to work around absent employees.  The unit employees should be familiar enough with each other’s jobs to be able to cover for the absent member, unless the position is highly specific , in which case the manager should be able to secure coverage.  The manager should also be tuned in to the needs of the group, and if there’s a particularly unhappy employee who might have multiple absences, address the issue and mitigate the problem if possible. 
Actual disciplining of employees that abuse the company leave policies is more difficult.  There are a number of regulations such as the federal and state medical leave laws, disability absences, bereavement and many more.  It is important that the employees understand clearly the company policies, and any potential problems are addressed immediately by the employer.
Providing a supportive atmosphere for the employee while having the expectation that they’ll be at their jobs as required is a balancing act.  That’s why we have managers – best of luck to them!

Tags: benefits, employee benefits, employee morale, performance management