Category Archives: compensation

The State of Year-End Bonuses

For many workers, 2017 will end on an extra jolly note, according to new research from global staffing firm Robert Half.

More than half of  300 senior managers surveyed (51 percent) said they expect year-end bonus levels to be at least somewhat higher than 2016. Just 10 percent of respondents reported bonus amounts will decrease, and 39 percent anticipate no change in bonuses.

When those senior managers were asked, “Do you expect year-end bonus levels to be higher or lower than last year?” they responded:

Much higher

9%

Somewhat higher

42%

No change from last year

39%

Somewhat lower

7%

Much lower

3%

100%

 

Separate Robert Half research found workers’ performance only partly determines their bonus. In the survey, just 16 percent of HR professionals reported bonuses are based solely on individual work, compared to 27 percent who said amounts are influenced by employee and company results. Another 22 percent said they factor individual, team and company success into bonus decisions.

“Bonuses are a key recruiting and retention tool, especially with the intense competition for top performers,” said Paul McDonald, senior executive director at Robert Half. “If budgets are tight, other ways to recognize exceptional work at the end of the year include gift cards, a department celebration or additional time off for the holidays.”

McDonald added, “To enhance their chances of securing in-demand candidates near year-end, particularly in today’s hiring market, savvy companies are offering job seekers a sign-on bonus to offset a performance bonus they would have received from their existing employer.”

 

Study: Pay Scales Tip Toward Gay Men

happy man with moneyOver the past few years, the world has made some great strides in the acceptance of LGBTQ individuals. Same-sex marriage was legalized in the United States in 2015, same-sex adoption was legalized in all 50 states in 2016 and the transgender military ban was lifted in 2016.

Meanwhile, more than two dozen countries now recognize same-sex marriage, according to the Pew Research Center.

And now new research has revealed that gay men no longer experience a negative pay discrepancy when compared with demographically similar straight men. In fact, gay men appear to have reached a 10-percent earning premium – meaning they earn more than their straight-male counterparts.

The lead researcher for this study, Christopher (Kitt) Carpenter, professor of economics at Vanderbilt University in Nashville, Tenn., examined available data on self-identified gay men, which is harder than it sounds.

Not only is the overall self-identified LGBTQ population small, approximately 2 percent to 3 percent, but surveys haven’t asked about individual’s sexual orientation until very recently, said Carpenter.

For this study, he examined data from the nationally representative National Health Interview Survey, which began including sexual orientation in its questionnaires in 2013.

“For the past 15 years, I’ve been crunching numbers from every single data set I can find that credibly identifies LGBTQ individuals and their economic details. And for more than 20 years, studies have all concluded that gay men, when compared with straight men who come from similar economic backgrounds, earned approximately 5 to 10 percent less. This is the first study that has shown the opposite may now be true.”

The 10-percent premium surprised Carpenter and his co-author so much that they ran extra tests to determine if this earning premium  was a coincidence.

All previous literature points to gay men earning less. But test after test revealed the same thing: Gay men are earning more than demographically similar straight men.

“This finding has raised more questions than answers,” Carpenter said. “What helped the pay scales tip in favor of gay men – is it new legislation, or perhaps greater acceptance of LGBTQ folks? If this is the case, the implications of this study are to look closely at what is it about the nature of the workplace that has changed. If it’s anti-harassment and discrimination policies that’s great and should certainly be evaluated closer.”

Scholars have long thought that sexual-orientation minorities spend a lot of time and energy closeting themselves, he added. “They spend time worrying about whether their colleagues are wondering about them, or, if outed, will they be fired? This means that LGBTQ folks can’t perform to their full potential. Anti-discrimination and harassment policies are catalysts to change this.  Creating safe spaces for LGBTQ folks to just be themselves will only foster a more productive environment in and out of work.”

Carpenter hopes that these results will compel HR leaders to review and refine their own compensation policies and procedures because there’s still an enormous amount of evidence that points to the nature of discrimination in the workplace.

For instance, a recent study conducted in India found that discrimination against LGBTQ individuals may cost the country an upwards of $32 billion a year in lost economic output. That type of loss certainly isn’t in the best interest of anyone.

Employers and Salary-History Bans

When it comes to achieving pay equity in the workplace, employers apparently aren’t sold on the idea that banning salary-history questions from the interview process will be effective in achieving that goal.

A new survey by the Hay Group division of Korn Ferry shows that 65 percent of executives at 108 companies believe their organizations will be affected by new legislation aimed at closing pay gaps for women and other underserved populations. However, the majority of executives polled (65 percent) believe that the law will not, or only to a small extent, actually improve the gender pay equity situation in their organization.

What is clear is that hundreds of thousands of employers will need to modify their talent screening and hiring processes, Korn Ferry said in a statement announcing the survey’s results.

“Organizations have a great deal to gain by implementing a strategy and process aimed at improving the overall fairness and transparency of their reward and talent management programs,” said Bob Wesselkamper, Global Head of Rewards and Benefits Solutions, Korn Ferry Hay Group. “This can help organizations create an employee value proposition that positions the company as a place where everyone can build careers and thrive.”

In addition, hiring situations must be handled carefully as companies that violate the new rules can face substantial fines, the consultancy notes:

“As a result of this legislation, many employers will need to seek out better market data and conduct more rigorous analyses to determine what a job should pay versus relying on the crutch of a candidate’s compensation history,” said Tom McMullen, Senior Client Partner in Korn Ferry Hay Group’s Reward and Benefits group. “Organizations need to ensure they have an effective job evaluation process that provides the right criteria and credibility for assessing the size of jobs.”

Jonathan Segal, an employment lawyer based in Philadelphia, told the Los Angeles Times the bans could be particularly relevant for older workers. Someone who has been working for more years and may be looking to scale back to a less demanding job — or workers eager to get back into the workforce after being out of a job and willing to work for less — could be subject to implicit bias when asked about their past pay, he said.

“Eliminating the question may help not only eliminate the pay gap for women,” he said, “but may help older employees who are being excluded because employers think they won’t be happy working for less.”

Meanwhile, Korn Ferry says further action on pay equity is likely ahead, but few say they are ready. Only 19 percent of organizations say they are well prepared to handle the new laws once they go into effect. Many large organizations are indicating that they are likely to get ahead of the issue by changing their national policies instead of waiting for individual cities and states to pass measures. Nearly half of the executives polled (46 percent) said choosing to comply with the most stringent legislation is the likely mode of adapting to the new legislation, as opposed to complying to each local legislation.

“It’s a new game out there,” said McMullen. “Few large organizations will be exempt. It’s better to be prepared than to be caught by surprise on this.”

 

Survey: It Pays To Be Fair

Employers are keenly aware that employee engagement and satisfaction have fast become two of those seemingly elusive culture goals. Surveys from a variety of sources over the past few years peg engagement levels in the low-to-mid thirties.

Gallup, for example, which follows employee engagement closely, reports that in 2016 employee engagement remained stagnant from the previous years, barely budging from 31.4 in 2014 and 32 percent in 2015. Of course, there are many factors that go into high levels of employee satisfaction.

Now, a study out this week reveals that the pay process at an organization, in terms of fairness and transparency, is 5.4 times more impactful on how satisfied employees are than how they are paid relative to their market value.

PayScale, Inc., a cloud-based compensation data and software provider, designed the survey to identify the drivers of employee engagement. It queried more than 500,000 employees for its employee engagement research on various aspects of their job that could potentially contribute to both employee satisfaction and potential attrition.

“This research aims to shed new light on employee satisfaction and intent to leave in an era where engagement is at an all-time low,” Lydia Frank, vice president of Content Strategy at PayScale, said in a news release. “Our study shows that just by having an open dialogue about the pay process and employees’ contributions at the company, employers can ultimately drive better outcomes for their businesses.”

Another interesting finding is that when employees feel appreciated by their employer – and believe their company has a bright future – they are far more likely to be satisfied at work and remain at the company.

Other findings include: employees don’t know whether they’re paid fairly. Of the respondents who felt they were paid below market rate, nearly 90 percent were actually paid at or above market rate. That means only 11 percent of people who felt they were underpaid were correct; also, paying fairly really matters. The research shows 75 percent of respondents who think they are paid at or above the market rate said they were satisfied with their job, compared to only 59 percent of workers who felt they are paid below the market rate.

“This is provocative research that comes at a time when more and more companies are looking for ways to increase satisfaction with employees so they can get the biggest return from their talent investments,” said Pete DeBellis, research leader at the analyst firm Bersin by Deloitte. “The results are surprising and show us just how crucial it is for employers to make the leap and start talking more openly about pay in order to build more trusting relationships with their employees.”

‘Compensation Is Not Appreciation’

According to “Mind the Workplace,” a new joint report by the Faas Foundation and Mental Health America, 71 percent of employees are thinking about—or actively looking— for new jobs.

That’s according to the report’s Workplace Health Survey of 17,000 employees across 19 industries in the U.S. The survey also found that the healthiest workplace industries are healthcare, financial Services and nonprofits, while the most unhealthy industries are manufacturing, retail and food and beverage.

The Workplace Health Survey findings also show that “only 21 percent of respondents felt that they were paid what they deserved, while 44 percent of respondents felt that skilled employees were not given recognition. Additionally, only 36 percent and 34 percent of respondents felt that they could rely on supervisor and colleague support, respectively.”

This perceived lack of support and recognition in the workplace, the report’s executive summary notes, contribute to higher levels of workplace stress and isolation, and are strongly correlated with job dissatisfaction. Survey respondents also reported high rates of absenteeism (33 percent) and work-family (81 percent), as well as increased mental health and behavioral problems (63 percent).”

The good news from the report, says Carmine Gallo, a contributor at Forbes who posted on the study’s results, is that “if leaders want to keep employees happy and loyal, there is a ‘low-cost’ option that ‘makes a significant impact.’ The ‘option’ is called praise. You’ve heard of it, but are you implementing it?”

According to the study, Gallo says, “Staff recognition and praise matters more than compensation, indicating that improving managements’ skills and ability to provide verbal and written support is more meaningful than increasing salaries . . . employees want to feel valued.”

Gallo goes on to cite behavioral economist Dan Ariely’s book, Payoff, in which the author “reveals the results of experiments which find that money matters far less to employees than either they or their bosses think.”

“When we are acknowledged for our work, we are willing to work harder for less pay, and when we are not acknowledged, we lose much of our motivation,” writes Ariely. “Acknowledgement is a kind of human magic—a small human connection, a gift from one person to another that translates into a much larger, more meaningful outcome.”

Compensation is not the same as appreciation, Gallo concludes.

“Appreciation is an emotion, a feeling that your boss values your contribution. Those leaders who actively engage people’s positive emotions have companies that score better on almost all metrics: financial performance, employee engagement, retention and recruiting.”

New Guidance on Pay-Ratio Rule

In case you missed it, last week the Securities and Exchange Commission approved interpretive guidance to assist companies in their efforts to comply with the pay ratio disclosure requirement mandated by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Under the Commission’s rule implementing the pay ratio requirement, companies are required to begin making pay ratio disclosures in early 2018.

“It’s our priority to make sure that we implement disclosure rules mandated by Congress in a way that is true to the mandate and, to the extent practicable, allows companies to use operational data and otherwise readily available information to produce the disclosures,” said Chairman Jay Clayton.  “Today’s guidance on pay ratio reflects the feedback the SEC has received and encourages companies to use the flexibility incorporated in our prior rulemaking to reduce costs of compliance.”

In particular, the guidance:

  • States the Commission’s views on the use of reasonable estimates, assumptions and methodologies, and statistical sampling permitted by the rule;
  • Clarifies that a company may use appropriate existing internal records, such as tax or payroll records, in determinations about the inclusion of non-U.S. employees and in identifying the median employee; and
  • Provides guidance as to when a company may use widely recognized tests to determine whether its workers are employees for purposes of the rule.

The Commission’s staff is also providing guidance separately about the pay ratio rule.

“This additional staff guidance, which includes examples illustrating how reasonable estimates and statistical methodologies may be used, is intended to assist companies with their compliance efforts and reduce the costs associated with preparing disclosures,” said Bill Hinman, director of the division of corporation finance. “We encourage companies to contact the division staff if additional interpretive questions arise as the compliance date approaches.”

Privacy May Trump Fed Data Demands

A judge’s early ruling in Google’s complex legal battle with the U.S. Department of Labor highlights a new argument that other companies may use in fighting regulators’ demands for HR data: The government can’t be trusted to keep it safe from hackers.

The ruling came after the DOL’s Office of Federal Contract Compliance Programs had been auditing the company’s compensation practices for much of 2017, according to a blog post by Google vice president for people operations Eileen Naughton. Federal officials first requested documents in September 2015.

The Labor Department has not publicly accused Google of any specific violation, but critics have claimed the company—and others in tech—pays men more than women for the same work. Naughton, however, maintains that company data disprove this claim. “Our own annual analysis shows no gender pay gap at Google,” she writes.

The company had been cooperating with the audit, providing the government more than 329,000 documents and “detailed compensation information,” Naughton writes. Included were records on more than 21,000 employees.

But the two sides reached an impasse over the summer after the Labor Department demanded more information in June, according to a summary of the case by San Francisco-based administrative law judge Steven B. Berlin accompanying his July 24 preliminary ruling in the case (posted here, thanks to the Washington Post). The agency and company found compromises on some requests but remained at odds over others, Berlin writes.

According to Naughton, Google balked after DOL auditors wanted “employees’ compensation and other job information dating back 15 years, as well as extensive personal employee data and contact information for more than 25,000 employees. We were concerned that these requests went beyond the scope of what was relevant to this specific audit, and posed unnecessary risks to employees’ privacy.”

In his July decision, which is not yet final, Berlin granted a portion of the DOL request, but ruled that the request for employee contact information was “over-broad, intrusive on employee privacy, unduly burdensome, and insufficiently focused on obtaining the relevant information.”

Noting that hackers have accessed the federal government’s own employee records in a well-publicized 2015 data breach at the U.S. Office of Personnel Management, the judge outlined his other main objection to the DOL requests: “My concern centers on [the] extent to which the employee contact information, once at OFCCP, will be secure from hacking, OFCCP employee misuse, and similar potential intrusions or disclosures. OFCCP has already collected for 21,114 employees information such as name, date of birth, place of birth, citizenship status, visa status, salary, and stock grants. That information, if hacked or misused, could subject tens of thousands of employees to risk of identity theft, other fraud, or the improper public disclosure of private facts. Adding contact data, such as personal phone numbers and email addresses, increases the risk of harm to Google’s employees. The contact information could ease the efforts of malicious hackers or misdirected government employees.”

What does this mean for HR?

One employment attorney says the lesson for employers is to respond cautiously to government demands for sensitive employee data.

“The July order demonstrates that employers can, and should, take steps to protect their employees’ confidential information—even when such information is demanded by the government,” writes Margaret C. Inomata of the Washington, D.C. office of Vedder Price, in a blog post. “By resisting the OFCCP’s overbroad requests, Google managed to significantly pare down the scope of the agency’s demand and forced the OFCCP to take additional steps to protect its employees’ contact information,” she writes “Like Google, other employers should consider creative solutions to defend against the unnecessary disclosure of sensitive employee data and maintain their employees’ trust.”

 

Want Happy Workers?

A new report by Adecco USA uncovers how employers are experimenting with ways to attract and keep skilled workers happy, with the C-suite considering pay the most important factor.

According to the report, Best in Class Workforce Management Insights,  77 percent of 500 U.S. executives surveyed for the report consider pay to be the top concern when it comes to attracting and retaining workers.

“In this candidate-driven market, the burden is on employers to offer compelling reasons for candidates to join and remain with their organizations. Right now, part of the conversation is centering around wages,” said Joyce Russell, president, Adecco USA.

“While fair pay is a key driver in securing today’s workforce, employers must also make predictions and be nimble in adopting new solutions as the meaning of ‘Best-in-Class’ continues to evolve,” Russell added.

Among the other findings in the report:

  • 77 percent of executives believe pay is the most important factor to employees.
  • More than half of respondents offer health insurance and 401(k) packages to salaried employees, and 40 percent say they now also offer “softer” benefits, like flexible schedules.
  • 47 percent of employers do not prioritize hard or soft skills over the other when vetting a job candidate, and they weigh a candidate’s happiness as early as the interviewing phase.
  • Less than half of employers are offering education courses to their employees, but 61 percent believe mentorships are of importance in determining employee happiness.

You can download the full report here.

Survey: 3-percent Raises in 2018

The economy is generally strong and low unemployment rates mean some organizations are scrambling for workers. But most companies are not planning to spend more on pay increases in 2018, according to a new survey.

Employers are prepared to open their checkbooks a bit wider to reward top performers, according to the global consulting firm Willis Towers Watson, which surveyed 819 U.S. companies in a range of industries from April through July.

Of companies surveyed, 99 percent expect to grant raises next year, according to a summary by Willis Towers Watson. The average 2018 raise forecast for most employees, including both professional and nonexempt workers, was 3 percent — the same as the average raise given in the last three years. The average expected raise for executives is about the same — 3.1 percent.

“Most companies are not under any significant pressure to increase their salary budgets in the near term,” said Laura Sejen, Willis Towers Watson’s managing director for human capital and benefits, according to a company announcement.

Employers continue to offer performance bonuses to their most valuable players, the survey found. Among companies surveyed, top performers received raises of up to 4.5 percent. Willis Towers Watson found some companies surveyed base their bonuses not only on performance, but on professional development.

“While organizations may be forecasting 3% increases, the landscape of how and when they are giving increases varies considerably,” said Sandra McLellan, North America rewards practice leader at Willis Towers Watson, according to the company announcement.

 

Comment Period Begins for OT Rule

The Department of Labor is expected to publish today in the Federal Register its anticipated Request for Information on its overtime rule.

As you may recall, the rule was blocked last November by a Texas federal judge before it would have expanded overtime protections to over 4 million workers, by more than doubling the annual salary level at which workers must be compensated for overtime pay, from $23,660 to $47,476. There will be a 60-day public comment period following tomorrow’s Request for Information.

Seyfarth Shaw attorney Alexander Passantino, former acting administrator of the Labor Department’s wage and hour division, and current partner in the D.C. office of the firm, writes in a blog post that the issues the DOL seeks comment on include whether the 2004 salary test should be updated based on inflation, and if so, which measure of inflation; whether duties test changes would be necessary if the increase was based on inflation; and other questions.

The issues on which the Department seeks comment, according to Passantino’s post, are:

  • Should the 2004 salary test be updated based on inflation? If so, which measure of inflation?
  • Would duties test changes be necessary if the increase was based on inflation?
  • Should there be multiple salary levels in the regulations? Would differences in salary level based on employer size or locality be useful and/or viable?
  • Should the Department return to its pre-2004 standard of having different salary levels based on whether the exemption asserted was the executive/administrative vs. the professional?
  • Is the appropriate salary level based on the pre-2004 short test, the pre-2004 long test, or something different? Regardless of answer, would changes to the duties test be necessary to properly “line up” the exemption with the salary level?
  • Was the salary level set in 2016 so high as to effectively supplant the duties test? At what level does that happen?
  • What was the impact of the 2016 rule? Did employers make changes in anticipation of the rule? Were there salary increases, hourly rate changes, reductions in schedule, changes in policy?  Did the injunction change that? Did employers revert back when the injunction was issued?
  • Would a duties-only test be preferable to the current model?
  • Were there specific industries/positions impacted? Which ones?
  • What about the 2016 provision that would permit up to 10% of the salary level to be satisfied with bonuses? Should the Department keep that? Is 10% the right amount?
  • Should the highly compensated employee exemption salary level be indexed/how? Should it differ based on locality/employer size?
  • Should the salary levels be automatically updated? If so, how?

“Of course, the value of these responses ultimately is dependent on the Fifth Circuit’s decision on whether the salary test is permissible to begin with,” Passantino writes. “Should the Fifth Circuit rule in the Department’s favor on that issue, the RFI responses will provide the Department with the information it needs to proceed on a new rulemaking adjusting the salary level . . .  assuming the employer community responds.”