Category Archives: compensation

… But What About Gen X Workers?

What will we do as the baby boomers retire en masse, and take their decades of knowledge and experience with them? And these millennials, who many projections say will soon make up nearly three-quarters of the U.S. workforce—how do we harness their considerable abilities and put them to the best use within our organization?

Organizations everywhere have wrestled with the questions and challenges surrounding these unique groups of workers in recent years.

But there’s another, large group of employees in the middle that may not receive as much attention. Some new research, however, suggests that employers would be wise to focus more on Generation X and the many assets this dedicated cohort can bring to the workplace.

As a card-carrying member of Gen X, I absolutely remember a time when we were mostly thought of as a pretty apathetic bunch with no real work ethic. (Not that we cared about these perceptions or felt like expending any effort trying to change them.) But this new survey, conducted by the Futurestep division of Korn Ferry, finds that Gen Xers—defined in the study as those born between 1965 1980—are actually the most engaged employees in today’s workforce.

Indeed, 52 percent of the 1,070 executives responding to the recent global poll said as much, compared to 23 percent saying they see boomers as the most invested in their jobs, and another 23 percent feeling the same way about Gen Y workers. (The remaining 2 percent felt those fresh-faced, barely-out-of-their teens comprising Generation Z are the most engaged.)

“While members of each generation are critical to the workforce and their diversity of thought brings new ideas and insights to companies, organizational leaders would benefit by harnessing and rewarding the hard work habits of Gen Xers,” says Andrea Wolf, Futurestep’s North American HR practice leader, in a recent statement announcing the findings.

So, what can employers offer to attract these hard workers and provide the perks that make them want to stay?

According to the survey, feeling they have “the ability to make a difference in the organization” was most important to 39 percent of Gen X-age employees in the workplace. That figure is more than double the number of respondents citing “job stability” (16 percent) or “development opportunities” (15 percent) as what matters most to these workers.

In terms of retention, 41 percent of respondents said experiencing “a sense of pride in their work” was what kept Gen Xers in their current jobs, with 24 percent most valuing “financial stability” and 23 percent prizing “company culture” above all else.

And what kind of benefits get those notoriously indifferent Gen Xers revved up about their jobs? Money helps, of course, with 48 percent of respondents pointing to “pay and bonuses” as the most important benefit to employees in this age group, followed by “paid time off,” at 25 percent, and “retirement plans,” at 19 percent.

While Gen Xers might say they want time off, don’t count on them to take it, says Wolf.

“Talk to a Gen Xer about his or her vacation, and they’ll say they’re too busy to take one, or they had to cut it short because of work,” she says. “Employers may want to consider rewards other than extended vacation time to attract and retain this group.”

Too busy at work to take vacation? Thinking about retirement? Wow, there was a time when we were too busy slacking off and obsessing over Seinfeld to even look for a job or consider our financial futures. Gen X has really come a long way.

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Pay for Performance is Given a Poor Grade

Money on hand.

Money on hand.

Employers have long embraced the notion of paying for performance. But are these programs really making a difference? Are they really leading to better employee performance?

If we’re to believe the latest survey of 150 companies coming out of Willis Towers Watson, the impact these efforts are having on organizations leaves something to be desired.

According to the Arlington, Va.-based consultancy, the vast majority of North American employers say their pay-for-performance programs are falling short when it comes to driving individual performance.

Moreover, the survey finds that only one in five companies (20 percent) find merit pay to be effective at driving higher levels of individual performance at their organizations. Further, just under one-third (32 percent) report their merit-pay programs are effective at differentiating pay based on individual performance.

Nor are employers the only ones giving these programs low marks. Only about half of employees say these programs are effective at boosting individual performance levels; and even fewer (47 percent) believe annual incentives effectively differentiate pay based on how well employees perform.

Why the low marks?

Part of the reason is employers are either trapped in a business-as-usual approach or suffering from a me-too mentality when it comes to their programs, according to Laura Sejen, global practice leader for rewards at Willis Towers Watson.

Sejen elaborates …

“Pay-for-performance programs, when designed and implemented effectively, are great tools to drive performance, and recognize and reward employees. However, conventional thinking on pay for performance is no longer appropriate. Companies need to define what performance means for their organization[s] and how managers can ensure they are driving the right performance, and re-evaluate the objectives of their reward programs to ensure they are aligned with that definition.”

Nearly two-thirds (64 percent) of those surveyed say managers at their organization consider the knowledge and skills required in an employee’s current role when making merit-increase decisions, according to the study. That compares to fewer than half (46 percent) who say their programs are designed to take these performance indicators into consideration.

The Willis Towers Watson findings probably shouldn’t come as a huge surprise to those in HR, since they echo the findings of other studies we’ve reported on in the past.

Roughly a year ago, for instance, we reported on research by Organizational Capital Partners and the Investor Responsibility Research Center Institute that found 80 percent of S&P 1500 companies are not measuring the right metrics, over the right period of time, for performance-based executive compensation.

So what’s the key takeaway here? Well, if we’re to believe the research, it’s the fact that employers clearly have a lot more work to do when it comes to pay for performance—and no one knows this better than the companies themselves.

But, of course, knowing and doing something about it are two entirely different things.

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EEOC Wants Pay Data From Employers

Under a new proposal from the Equal Employment Opportunity Commission, all employers with more than 100 workers will be required to furnish pay data to the federal government as part of their Employer Information Report (EEO-1), beginning with the September 2017 report. The objective, says the EEOC, is to make it easier for the government to spot potential cases of pay discrimination and to assist employers in promoting equal pay in their workplaces.

The proposal will be announced today in conjunction with a White House ceremony commemorating the seventh anniversary of the Lily Ledbetter Fair Pay Act.

“More than 50 years after pay discrimination became illegal it remains a persistent problem for too many Americans,” said EEOC Chair Jenny R. Yang in a statement. “Collecting pay data is a significant step forward in addressing discriminatory pay practices.”

“We can’t know what we don’t know,” said Secretary of Labor Thomas E. Perez. “We can’t deliver on the promise of equal pay unless we have the best, most comprehensive information about what people earn.”

The collected pay data will help employers evaluate their own pay practices to prevent pay discrimination in their workplaces while giving the Labor Dept. “a more powerful tool” to do its enforcement work, said Perez.

The EEOC proposal is in response to a task force set up by President Obama, which recommended new data-collection requirements to combat pay discrimination in the workplace.

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Giving New Hires a Boost in Pay

Despite much stronger U.S. jobs reports—the latest released by the Department of Labor this morning showing an increase of 292,000 jobs added in December—employers have typically kept wages in check. Many have expected the tightening labor market to begin to lift take-home pay, but with a few exceptions, that hasn’t materialized. Indeed, wages dropped a penny in this latest DOL report.

ThinkstockPhotos-476196983Of course, it’s another story for those switching jobs, as a study released yesterday by Robert Half confirmed. In a survey of CFOs, the Menlo Park, Calif.-based staffing firm found more than half (54 percent) of those surveyed report increasing new hires’ starting salaries from what they made in their previous jobs, with the average increase around 10 percent.

About 36 percent of the CFOs said the salary was the same, while 5 percent said it decreased and 5 percent weren’t sure.

Asked how the pay increase compared to what they offered two years ago, 68 percent of CFOs responded that today’s salaries were at least somewhat higher.

As Robert Half’s Paul McDonald explains …

“Employers who want to improve their odds of securing skilled talent are offering highly attractive starting salaries right now. Companies are competing not just with other businesses that are hiring but also with the applicant’s current employer, who may make a counteroffer to retain the services of a valued employee.”

McDonald added that “professional job seekers with in-demand skills are receiving multiple job offers. Employers need to put their best bid on the table—and do so quickly—or they risk losing good talent.”

Seemingly good advice, as employers start their efforts to fill some of the positions they’ve budgeted for 2016.

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Employers Worry About Pay-Ratio Perceptions

Results of a recent poll by New York-based Towers Watson show it’s not the mechanics of complying with the new CEO pay-ratio-101366398 -- money on scaledisclosure rule — such as data gathering, getting the right sampling, identifying the median employee and the like — that worries employers the most.

It’s how they’re going to explain the pay-setting process to their employees and how their pay ratio will look compared to other companies’ ratios. This according to the almost 600 corporate compensation professionals who weighed in on the Towers Watson Webcast Poll on CEO Pay Ratio Disclosure Rule.

The communication issues loom especially large. Half the respondents cite that issue among their top concerns. Also, how employees will react when they start comparing their compensation to their CEO’s and to the median employees’ is keeping many a top business leader up at night.

For a refresher, this New York Times piece offers some pretty complete details, history and analysis of the 3-to-2 vote on Aug. 5 by the Securities and Exchange Commission that will require most public companies, starting in 2017, to regularly reveal the ratio of their chief executive’s pay to that of employees.

Some of the controversy is also spelled out in the piece:

“Representatives of corporations were quick to assail the new rule … saying that it was misleading, costly to put into practice and intended to shame companies into paying executives less.

“But the ratio, cropping up every year in audited financial statements, could stoke and perhaps even inform a debate over income inequality that has intensified in recent years as the wages of top earners have grown far more quickly than anyone else’s.”

What’s disconcerting at this point isn’t just how this ratio will be perceived, but how few employers really know what they need to do to comply. In the poll mentioned above, only 17 percent of employers agree they understand all of the costs, effort and data that will be needed while almost two-thirds (65 percent) disagree.

In an earlier Towers Watson survey of 170 U.S. compensation professionals, Towers Watson Talent Management and Rewards Pulse Survey, only 48 percent agree that their companies had identified the data they’ll need and know how they will capture it to calculate the pay ratio, while even fewer (41 percent) say they’re prepared for how the disclosure will affect employee perceptions of their pay.

And if you think time is on your side and you’ll get it right with many months to spare, think again, says Steve Seelig, senior regulatory adviser for executive compensation at Towers Watson.

It’s “not too early for HR to begin thinking about how well its company communicates with employees, and to then set a strategy for improving its message,” he says, adding to:

“Keep in mind that, when the disclosure comes out, workers below the median will [immediately start to] wonder what it takes to get them to that level, and why their company is not paying them more. Those employees at or above the median will naturally wonder whether their pay levels are determined fairly, or how the level of CEO pay might be hindering their pay increases. Workers also will be looking at companies across the street and pondering if their median pay is higher, and whether it might be a good idea to look around.

“Human resource executives should [be proactive and] view the pay ratio disclosure as a chance to make sure their employees understand [their company’s] pay-value proposition. Companies that get this communication effort right will find they actually have strengthened their relationship with the workforce, with better productivity and reduced turnover as likely outcomes.”

Those that don’t get it right shouldn’t be surprised when the opposite occurs.

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Pushing to Repeal the CEO Pay-Ratio Rule

WorldatWork is the latest organization to voice its objection to the Securities and Exchange Commission’s CEO pay-ratio rule.

Cara Woodson Welch, vice president of external affairs and practice leadership forWorldatWork, a nonprofit human resources association and compensation authority issued the following statement today encouraging House Financial Services Committee members to pass H.R. 414 the Burdensome Data Collection Relief Act which repeals the recently finalized U.S. Securities and Exchange Commission’s rules implementing the CEO pay-ratio requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank):

“Advancing this legislation and relieving companies from the disclosure requirements which have now been finalized by the SEC is sorely needed,” she said.

“Now that the rules are final, compensation and executive compensation practitioners are faced with the daunting task of trying to identify their median employee in order to comply with the CEO pay-ratio rules.

This process, she says, will be extraordinarily expensive, time consuming and burdensome for companies and will fail to result in any meaningful benefit for shareholders and potential investors.

“Once published, the ratio itself will require significant explanation to truly understand and it’s unlikely that shareholders, potential investors, members of the public or the media will take the time necessary to fully comprehend the methodology used by each company to reach their median employee calculation.

“The best solution for avoiding this ill-conceived requirement is full repeal. WorldatWork strongly supports H.R. 414 and respectfully asks members of the committee to pass this legislation and move it forward to the full House for consideration.”

WorldatWork submitted formal comments in 2013 and on July 6, to the SEC on the agency’s proposed regulations implementing the CEO pay-ratio requirement of Dodd-Frank.

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Bonuses for Low Performers

“So, Mr. Employee, your performance this year has failed to meet expectations. And … here’s your bonus.”

bonus failThat’s right — about three in 10 (30 percent) of U.S. employers plan to give bonuses to employees who fail to meet expectations (the lowest performance ranking possible) this year, according to Towers Watson’s just-released Talent Management and Rewards Pulse Survey.  Meanwhile, these companies are once again failing to fully fund their employee bonus pools and say they continue to struggle to attract and retain “critical skill” employees.

“The fact that some companies continue to deliver substantial bonuses to weak performers raises questions as to whether they are investing their bonus dollars as effectively as possible or truly holding workers accountable for performance,” says Laura Sejen, managing director at TW.

It should be noted, however, that the poor performers don’t necessarily get the same bonuses as the  high performers. While some of the companies give payouts to all employees regardless of performance, others give their lowest-ranking employees only 65 percent of their target payout, while the high performers tend to receive bonuses of about 19 percent above target, according to the survey, which queried 170 large and mid-sized companies from various industries.

The companies’ average projected bonus funding for the current year is only 89 percent of target — this marks the fifth year in a row that U.S. employers have not fully funded their bonus pools, according to TW.

More than half the companies (52 percent) say they’re having trouble holding on to critical-skill employees, compared to 41 percent in 2013. Meanwhile, 66 percent report problems attracting critical-skill employees.

“With hiring activity on the increase and employees more receptive to changing jobs, there is greater competition for talent, making it more difficult for companies to keep their most-valued employees,” says Sejen.

Employers also appear to be daunted by President Obama’s recent proposed changes to the Fair Labor Standards Act’s overtime rules, with 50 percent saying the changes will have a significant impact on their organizations and only 47 percent prepared to make the changes.

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DOL Mandates Pay Transparency

moneyOn the heels of President Obama’s recent executive order requiring federal contractors to provide at least seven days of paid sick leave, the Department of Labor’s Office of Federal Contract Compliance Programs today issued a final rule banning federal contractors from having policies that discourage their employees from discussing, disclosing or inquiring about their own pay or that of their co-workers.

The final rule implements Executive Order 13665, signed by the president last year, which stems from the Lily Ledbetter Fair Pay Act.

“It is a basic tenet of workplace justice that people be able to exchange information, share concerns and stand up together for their rights,” said DOL Secretary Thomas Perez in a statement. “But too many women across the country are in the same situation: They don’t know how much they make compared to their male counterparts, and they are afraid to ask.”

A “culture of secrecy” around pay keeps women from knowing they are underpaid and makes it difficult to enforce equal pay laws, according to the DOL. Women still earn only 23 cents for every dollar earned by male employees, the agency says.

The rule allows job applicants and employees of federal contractors and subcontractors to file a discrimination complaint with the OFCCP if they believe that their employer fired or otherwise discriminated against them for discussing, inquiring about or disclosing their own compensation or that of others.

Pay transparency benefits companies as well as employees, said OFCCP Director Patricia Shiu.

“Indeed, forward-thinking companies that have embraced greater transparency find that it benefits them and their workforce by helping them attract and retain talented workers,” she said.

The rule will go into effect 120 days after its publication in the Federal Register.

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CEO Generously Delivers to Workers

Why not end the week with a brief but upbeat story about a CEO who isn’t reluctant to share …

ThinkstockPhotos-480903116Stories appearing on CNN Money and Entrepreneur websites this week reported that Nevzat Aydin, co-founder and CEO of Yemeksepeti, a Turkish food delivery company he helped launch 15 years ago, recently decided to share a huge chunk of the proceeds generated from his company’s $589 million sale to Germany’s Delivery Hero with 114 of his employees. (The firm employs a total 370 employees.)

CNN Money reported the employees received an impressive $237 million from the sale. According to the story, “Aydin’s employees are paid between $1,000 and $2,000 a month. That means the average payout is worth roughly 150 times their monthly wage, and tops the average Wall Street bonus for 2014 by $65,000.”

Aydin told CNN Money that “Yemeksepeti’s success story did not happen overnight and many people participated in this journey with their hard work and talent. I believe in teamwork and I believe success is much more enjoyable and glorious when shared with the rest of the team.”

In deciding how to allocate the bonuses,” the Entreprenuer website reported, “Aydin factored in how long they’d worked for the company (requiring two years, minimum) along with the individual’s job performance and their ‘future potential in the company.’ ”

The story was first reported by Turkish newspaper Hurriet.

CNN Money noted that the bonus plan was decided upon prior to the sale, but that the acquirer, Delivery Hero, supported the move.

 

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HR, Training and the ‘Gig’ Economy

New survey data finds few organizations are investing in their employees’ training and development these days, and I’m beginning to think the “gig economy” may have something to do with it.

Saba, a global provider of talent management solutions, just released additional findings from its spring Global Leadership Survey, in which it found that a mere 13 percent of companies worldwide invest in talent-management programs to further employees’ growth and career path.

For those companies that are providing training, only 35 percent are offering career development opportunities online. And, according Saba, the majority of employees (57 percent) are simply getting their training from “on the job” experience.

“Understandably, companies are focused on bottom line growth and results,” said Emily He, Chief Marketing Officer at Saba. “Unfortunately, many organizations don’t consider the career development of their employees a part of that growth equation — but they should. ”

However, a piece in today’s New York Times titled “Rising Economic Insecurity Tied to Decades-Long Trend in Employment Practices,” shows how the rise of the “gig economy”  (think Uber or Lyft, for examples) is changing all sorts of expectations — including compensation and training — on both the employers’ and workers’ sides.

According to the NYT piece, tens of millions of Americans are now involved in some form of freelancing, contracting, temping or outsourcing work:

The number for the category of jobs mostly performed by part-time freelancers or part-time independent contractors, according to Economic Modeling Specialists Intl., a labor market analytics firm, grew to 32 million from just over 20 million between 2001 and 2014, rising to almost 18 percent of all jobs. Surveys, including one by the advisory firm Staffing Industry Analysts of nearly 200 large companies, point to similar changes.

So perhaps it’s no wonder that companies are devoting less time to training programs when they only expect to use such workers for short-term projects:

Since the early 1990s, as technology has made it far easier for companies to outsource work, that trend has evolved beyond what anyone imagined: Companies began to see themselves as thin, Uber-like slivers standing between customers on one side and their work forces on the other.

The piece also includes David Weil’s — who runs the Wage and Hour Division of the United States Labor Department — description from his recent book, The Fissured Workplace, of how investors and management gurus began insisting that companies pare down and focus on what came to be known as their “core competencies,” such as developing new goods and services and marketing them.

Far-flung business units were sold off. Many other activities — beginning with human resources and then spreading to customer service and information technology — could be outsourced. The corporate headquarters would coordinate among the outsourced workers and monitor their performance.

“In the past, firms overstaffed and offered workers stable hours,” said Susan N. Houseman, a labor economist at the W. E. Upjohn Institute for Employment Research. “All of these new staffing models mean shifting risk onto workers, making work less secure.”

The NYT piece notes that, while only representing a limited corner of the nation’s approximately $17.5 trillion economy, other types of workers are watching with trepidation how organizations are moving toward the “gig economy” model.

Indeed:

…[E]ven many full-time employees share an underlying anxiety that is a result, according to the sociologist Arne L. Kalleberg, author of Good Jobs, Bad Jobs, of the severing of the “psychological contract between employers and employees in which stability and security were exchanged for loyalty and hard work.”

While outsourcing and “gigging” jobs may cut organizations’ short-term costs in some areas (such as training and development efforts)  Saba’s He nonetheless emphasizes the need for companies to invest in training their workforce if they expect to succeed in the long run:

“Not only is talent management and training an integral part of workforce development, it’s proven to be a driving factor in the long-term growth and success of an organization.”

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