Current issue Newswire
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Effective compensation programs involve more than base salary, says Hewitt |
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| Variable compensation, perks used to attract and reward key employees |
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Written by Laurie Blake
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Friday, 03 October 2008 |
While salary increases are expected to be lower in 2009 than in 2008 for most employees, many high performers have opportunities to boost their overall earnings by more than the average 3.6 per cent increase, according to research conducted by Hewitt Associates, a global human resources consulting and outsourcing company. Organizations are relying on variable compensation – performance-related rewards that must be re-earned each year and do not increase base salary – and, in some locations and for some roles, perquisites to attract, retain, incent and reward key employees.
As the Canadian economy shows signs of a downturn in some sectors and in certain locations, salaries are not expected to increase by as much in the coming year as they did in 2007 and 2008, when raises averaged 3.8 per cent nationally. Even in Alberta, where salary increases still exceed those offered in the rest of the country, increases are expected to get smaller. In 2007, actual salary increases in Alberta were 6 per cent, decreasing to 5.6 per cent in 2008. Projected average salary increases for 2009 in Alberta are 5 per cent.
"Base salaries in Alberta will continue to increase, but not at such high rates," says Jeff Vathje, a senior compensation consultant in Hewitt's Calgary office. "Data from our 2008-2009 'Canada Salary Increase Survey' also indicates that fewer employers see a need to compensate workers in Calgary and Edmonton at a higher rate than those in other parts of the country."
In 2007, 52 per cent of employers paid workers in Calgary more than those doing similar work in other locations. In 2008, that figure dropped to 42 per cent. Edmonton also experienced a 10 per cent drop, with 25 per cent of employers providing extra salary to workers in that city in 2007, and only 15 per cent doing so in 2008. Two Alberta locations have not experienced a decline in employers offering extra pay, however: Fort McMurray held steady at 23 per cent, while 12 per cent of organizations in Grande Prairie did so in 2008, up from 6 per cent in 2007.
Hot jobs/hot locations
The supply of workers with certain skills or training—particularly engineering and information technology – is so low compared with the demand for these employees that 36 per cent of Canadian organizations make special compensation arrangements outside of base salary to attract and retain them. The same holds true for certain locations: 63 per cent of employers go to special lengths to recruit and hang on to workers in specific parts of the country, particularly Alberta.
This additional compensation takes a variety of forms. Sign-on and/or retention bonuses, a living or housing allowance (or housing loan or subsidy) are the most frequently offered monetary arrangements, while non-monetary awards include perquisites such as a cell phone, computer, internet hook-up, car allowance, flexible work arrangements, assistance in locating housing, and additional vacation time.
"Engineers in Fort McMurray are likely doing pretty well," notes Ian MacRae, a compensation consultant in Hewitt's Toronto office. "Not only are they receiving higher salaries than their counterparts in other locations, they're probably receiving a range of special compensation arrangements to ensure they stay with their employer."
Compensation aligned with business objectives
Even employees who don't have hot skills or work in hot locations may have an opportunity to gain additional income over and above their base salary. "Eighty-six per cent of employers provide variable compensation programs," says MacRae. "Employees receive a bonus if certain corporate, divisional and/or individual goals are attained."
However, employers are finding that creating and implementing a successful variable pay program may be harder than it seems. Two-thirds reported difficulty in designing pay programs that give employees a clear line of sight between their achievements and their reward. In addition, 61 per cent cited enabling managers to have effective pay conversations with their reports as a challenge.
"Successful variable pay programs have the ability to help employers drive business objectives, as well as keep employees focused on their goals in order to realize their earning potential," explains Vathje. "The program must, of course, be designed appropriately and administered properly. However, it is also critical that employees understand how the variable compensation plan works. Without a clear grasp of what they need to accomplish in order to help the organization succeed and be rewarded themselves, the program isn't going to work. Employers run the risk of losing key talent to competitors that appear to pay more when that happens."
Copies of the Hewitt Associates' 30th Annual "Canada Salary Increase Survey" are available at www.compensationcenter.com.
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Risk management trumps return on investment for pension managers |
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| Market volatility drives changes in pension plan design, says survey |
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Written by Laurie Blake
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Friday, 03 October 2008 |
Market volatility and stringent regulatory issues are reshaping how North America's pension portfolios are being managed. More than 75 per cent of senior finance executives across Canada and the United States said they plan to focus on reducing risk in their defined benefit (DB) pension portfolios, rather than seek greater return on assets, according to the second CFO Research Services study conducted in conjunction with professional services firm Towers Perrin.
"After the highs and lows of the past several years, we're in an economic environment where being ready for storm conditions is the new normal," said Monica McIntosh, national leader of Towers Perrin's Asset Consulting practice in Canada. "The study shows that in this new world, finance executives are reviewing their pension investment strategy from a broader enterprise risk perspective to avoid undesirable and unacceptable consequences in terms of funded positions and company costs."
Increased market risk in a low return environment has forced pension managers to increase their emphasis on managing risk versus seeking greater return on assets. More than ever, companies need to use increasingly sophisticated tools and approaches to protect their investments and ensure that pension funds deliver the benefits promised to plan participants.
"The Canadian market is already challenged with another 'perfect storm.' In our view, this is adding to the pressure on government for a complete overhaul to implement a pension system that works for all stakeholders and ensures Canadians have adequate retirement income," said McIntosh.
DB pension plan popularity has waned, but plans unlikely to disappear soon
Since 2000, the majority of company executives surveyed have made incremental changes to alter their DB plan designs. Thirty-six per cent of respondents have closed existing DB plans to new employees while continuing benefit accruals for current employees, while more than a quarter (28 per cent) replaced DB plans with defined contribution plans, shifting investment decisions and risk from the employer to the employee. In addition, while survey respondents noted there will likely be more incremental changes to come for DB plans, two-thirds (67 per cent) of companies are not likely to terminate them outright, at least for the next 24 months.
Executives Rethinking Plan Design
When it comes to plan design, nearly half of all respondents (45 per cent) said that performance of the economy or financial markets was the biggest external contributor influencing the decision-making process in DB plan design since 2000. Additional factors include competitors' pension offerings (40 per cent), changes in retirement program regulations (37 per cent), increased investor demand for profits and financial strength (18 per cent) and increased scrutiny of risk management practices.
Looking forward over the next 24 months, 62 per cent cite changes in regulation, legislation or accounting standards as the primary reasons to rethink their pension strategies. Additional catalysts include recent financial market events (41 per cent) and changes in company performance (33 per cent) - both of which have placed tremendous pressure on finance teams and pension portfolios.
"There will continue to be many forces at work that affect the relationship between a company and its employees," continues Monica McIntosh. "For many companies, pension plan management will include making simple changes to policies and portfolios, while for others, the process of evaluating the trade-offs involved with offering these plans will have broader implications for companies' financial health and their relationships with both current and former employees."
Additional Key Survey Findings:
- Only 21 per cent indicated pension risk management is closely coordinated with a broader risk management framework.
- Twenty-seven per cent noted that liability-based asset management prevails as the most common risk reduction strategy.
- Companies have managed their asset portfolio risk by altering their equity portfolios, investing in alternative assets and optimizing their fixed-income portfolios.
- Nearly half (47 per cent) said that regulatory or accounting requirements would be the chief obstacles impeding their ability to make timely decisions or desired changes in DB plans over the next two years.
- Forty-eight per cent indicated that recent trends in the capital markets and macroeconomic outlook have made their company seriously consider changing its asset allocation strategies, while 29 per cent said it made their firm consider altering its DB plan design.
"In our analysis, we found that when pension plans hold significant assets (when compared to total corporate assets), represent an especially large or mature commitment to benefits, or have a substantial impact on cash flow or earnings, companies are consistently more committed to increased funding of their pension plans in the years ahead," said Sam Knox, vice president and director of research, CFO Research Services. "But they appear to be more reluctant to make dramatic changes in the actual design of their DB plans in the years ahead - or to off-load risk onto third parties. Instead, they are most likely to address the risk from pensions through asset portfolio management methods like duration matching in its various forms."
The study, “Defined Benefit Plans Amid Market Volatility,” was conducted with CFO Research Services, the sponsored research unit of CFO Publishing, which produces CFO magazine. In March 2008, CFO collected the opinions of 214 senior finance executives across the United States and Canada with DB pension plans, and whose annual revenues range from $100 million to more than $20 billion.The full study is available through CFO's website at www.cfo-research.com, and through Towers Perrin's website at www.towersperrin.com.
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Revisit relocation policies in light of U.S. subprime crisis, says RLRS |
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| White paper offers relocation tips and considerations |
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Written by Laurie Blake
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Thursday, 18 September 2008 |
With this week's decline of Merrill Lynch, Lehman Brothers, and AIG, relocating U.S. employees to Canada has just gotten even more complicated, warns relocation experts from Royal LePage Relocation Services (RLRS). In a recently released white paper, Royal LePage advises Canadian
companies planning to relocate employees from the U.S. "to revisit
their relocation policies and costs to see how much housing assistance
their employees will need and whether it really is worth it."
By mid-2009, forecasters are expecting more than two million foreclosures across the United States, and for U.S. housing prices to drop by as much as 30 percent before the worst is over. And, that's on top of declining income, a U.S. unemployment rate that's at a four-year high, and inflation that's running at its fastest clip in 17 years.
The white paper literally charts the changes in the slumping U.S. housing markets, and then offers company a number of tips when examining their relocation policies. These tips include:
- Review financial obligations as many relocation offers will predated the subprime mortgage crisis.
- Encourage employees to market their homes aggressively rather than simply wait for assistance. Employers may want to offer incentives for those who sell quickly.
- Extend temporary assignments rather than permanent relocations.
- Offer housing subsidies.
For other tips and to read the entire white paper, visit www.seamlesstransitions.ca.
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Total Rewards conference comes to Canada |
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| Secret to creating a life-friendly organization to be unveiled at November conference |
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Written by Administrator
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Thursday, 18 September 2008 |
International career management expert and best-selling author Barbara Moses, PhD, is scheduled to kick off the 2008 Canadian Total Rewards Conference, November 17-19 in Toronto, ON. The Greater Toronto Area Rewards Association, along with the Ottawa Region Rewards Association and WorldatWork, are bringing together today's top HR professionals, business strategies and leading practices for two days of networking and knowledge sharing.
Dubbed "career guru" by Fast Company magazine, Moses will unveil the secret for creating a life-friendly organization. Moses' innovative approach to managing work and life has made her the leader in career self-management. Moses is president of BBM Human Resource Consultants Inc., and is the best-selling author of What Next? and Dish: Midlife Women Tell The Truth About Work, Relationships & the Rest of Life. She is also a work issues columnist for the Globe and Mail and appears frequently on TV and radio, including the Today Show, NPR, MSNBC, and Canada AM.
HR practitioners from leading companies such as Purolator Courier, TD Bank, Bell Aliant Regional Communications, Fairmont Hotels, Sun Life Financial, City of Montreal, and others will present on:
§ Motivating and retaining key talent in the Canadian market.
§ Being a strategic partner and preparing for a company's future needs.
§ Automating and strategically aligning employee incentive pay with business performance.
Early bird registration ends Oct. 2, 2008.
WorldatWork (www.worldatwork.org) is a global human resources association focused on compensation, benefits, work-life, and integrated total rewards to attract, motivate, and retain a talented workforce. Founded in 1955, WorldatWork provides a network of more than 30,000 members and professionals in 75 countries with training, certification, research, conferences, and community. It has offices in Washington, D.C., and Scottsdale, Arizona.
To register or for more details, visit www.worldatwork.org/waw/toronto2008/index.jsp.
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Over half of companies see labour as their primary challenge |
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| How do private companies win the fight for talent? |
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Written by Administrator
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Thursday, 18 September 2008 |
The growing shortage of qualified workers in Canada is forcing private companies to work harder to get the right people in the right jobs - and place a higher priority on keeping them. According to research from PricewaterhouseCoopers (PwC), a full 61 per cent of private companies see labour as their primary challenge in 2008. However, there are steps private companies can take to attract and retain the right people.
"As baby boomers retire, there are not enough young workers available to fill the void," says Don Edmonds, PwC's private companies services leader in the audit and assurance group in Toronto. Employees know they are in demand, and private companies need to come up with creative ways to attract and keep them. On a positive note, our research shows that in 2007, 85 per cent of private companies increased their focus on retention."
Ian Gunn, partner and leader of PwC's private company services in Calgary adds, "It is not enough to throw money at people - especially in western Canada, where wages are already above average. Private companies need a consistent, systematic approach for creating conditions to attract qualified employees and to work with them to keep them engaged."
Edmonds and Gunn suggest that private companies develop a strategy to attract and retain employees. Some examples include:
- Hire right. Have a very clear understanding of your culture and the type of people who best fit.
- Be clear with expectations. Companies that score high on employee satisfaction, have regular, formalized feedback processes in place.
- Be flexible. Flexible work arrangements including shorter work weeks and telecommuting are a business reality.
- Share the growth of the company. Go beyond cash bonuses-create a phantom stock plan, or allow employees to participate in the ownership of the company.
- Listen to your people. Create an environment that allows employees to enjoy what they do and to do what they do best.
PwC's 2008 Business Insights Survey, an annual survey that analyzes the opinions of private business leaders and provides benchmarking for similar companies, will be available after the summer.
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