FreshView
a publication of Cascade Employers Association
 

JANUARY 2011    

  In This Issue:

• Are Your Pay Practices Ready for an Economic Upturn?
• 2011 Economic Trends Survey Shows Cautious Optimism in Oregon & Nationwide
• U.S. Supreme Court To Hear Largest Pay Discrimination Case
• Questions & Answers
• Did You Know?
   

Are Your Pay Practices Ready for an Economic Upturn?

By Jerry Bumgarner, CCP, Director of Research and Compensation Services
Cascade Employers Association
jbumgarner@cascadeemployers.com

Considering the revelations of the 2011 Economic Trends Survey (see article below or SalaryTrends.com), I think it's time employers give serious thought to incentive-based pay plans. You will be better prepared for an economic upturn when you are confident that your pay and benefits are reasonably competitive (not too high and not too low). A compensation package with an incentive or "variable" component allows you to pay employees more competitively when you can afford it.

Employees agree - pay must be "enough." So, what is "enough" pay? Well, it's not a package with wages, salaries and benefits priced high above competitive market norms. Packages like this turned out to be an albatross during the economic downturn. Layoffs were the only answer in many cases.

A healthy alternative to higher salaries and benefits is an incentive pay plan which enables employers to pay based on performance - organizational performance, that is. When business is good, variable pay plans typically result in additional cash compensation for employees, which compares more closely to the upper quartiles of the market. On the other hand, when performance is below expectations employee cash compensation may be at or below competitive market averages.

If the apparent optimistic economic trend translates into reality and Oregon employers begin to increase staff to meet improved sales expectations, you better be sure your pay practices are ready to withstand greater competition for talent. Cascade has a staff of qualified compensation professionals that can help you evaluate your pay practices and structure plans that are market-worthy. Call us. We'd love to help.

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2011 Economic Trends Survey Shows Cautious Optimism
in Oregon & Nationwide

Released by Cascade Employers Association

"The 2011 Economic Trends Survey indicates cautious optimism by employers nationally and in Oregon" according to Jerry Bumgarner, the head of research at Cascade Employers Association. This comprehensive survey of nearly 2,800 organizations with more than 6,000 locations nationally reflects a consistent, cautiously optimistic view of 2011 by employers.

The survey includes responses from all 50 states, including 165 from Oregon, with similar cautiously optimistic views within each state and region of the country. To download a free copy of the new Economic Trends report for both Oregon and Nationwide, click here.

Oregon and National Economy Sales: Cautious Optimism

While close to 60% of both the Oregon and National respondents believe the overall economy will be about the same in 2011 as it was in mid-2010, 55% of those in Oregon and 65% of the nationwide respondents expect the outlook for their own business to be more promising in 2011 with increases in sales/revenue. This self-confidence is tempered by 45% of the Oregon respondents and 34% of those nationwide anticipating either flat sales/revenue or decreases in sales/revenue.

Staff Size: Growing A Bit in Oregon

Although 67% of the Oregon organizations reporting do not plan to increase the size of their staff in 2011, about 35% of the respondents plan to hire additional staff, with most of those expected during the first half of 2011.

Oregon Compensation & Benefits Strategies

Employers' optimism tinged with conservatism is clear to see in their approach to pay. Nearly 60% of the Oregon respondents report that they plan on giving pay increases in 2011. Balancing out this optimism are 24% that were uncertain at the time or delaying the decision as well as the remaining 23% who plan to freeze or reduce pay.

In the past two years, many Oregon employers either froze or reduced pay as cost cutting measures. Of the organizations that froze pay in 2009 or 2010, half plan to give most or select employees increases in 2011. 22% report a continuation of the pay freeze and 29% of respondents are uncertain. Similarly, half of the organizations that reduced pay in 2009 or 2010 either already restored pay to pre-reduction levels or plan to do so for most or selected employees in 2011. 24% will continue at the reduced pay and 26% of respondents are uncertain.

Company matches to 401(k) contributions have remained relatively consistent in the past two years. Of the Oregon respondents with a 401(k), 71% kept matching contributions intact for all employees in the past, and will match again in 2011. 14% of respondents with a 401(k) plan reduced, suspended or eliminated matching contributions for some or all employees in 2009 or 2010, but will partially or fully restore the match in 2011.

More Cost-Cutting in Oregon

As Oregon employers continue to manage their organizations through the challenging economy, nearly 43% plan to trim costs by focusing mainly on lean / process improvement initiatives. The top cost-cutting measures planned for 2011 in Oregon are outlined below:

"Interestingly, 33% of the Oregon respondents have no cost-cutting measures planned for 2011. It's not clear if this is a barometer of employers' optimism or if it is an indicator of how lean companies are operating after past cost-cutting measures," said Bumgarner.

Survey Information

The survey was conducted locally and nationwide by Cascade Employers Association in cooperation with 24 similar employer associations from throughout the U.S. Survey data was collected between mid-November and mid-December of 2010.

To download a free copy of the Economic Trends Report, click here.

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U.S. Supreme Court To Hear Largest Pay Discrimination Case

By Jenna Reed, JD, MBA, Director, Human Resource Development Services
Cascade Employers Association
jreed@cascadeemployers.com

This spring the U.S. Supreme Court will hear and make a decision over whether the largest employment discrimination case on record can move forward as a class action lawsuit. In the lawsuit against Wal-Mart Stores, the plaintiffs claim the company discriminated against women in pay and promotions. If accepted, the class would be comprised of more than half a million women who worked in 3,400 stores, in 170 different jobs, and in each of the 50 states. If Wal-Mart is found to have discriminated against the class, the award could be in the billions of dollars.

The Supreme Court is not making a decision over whether the plaintiffs were in fact discriminated against, but only if the case can proceed as a class action suit. Wal-Mart claims the class should not be certified because each store operates independently and the women should file complaints against the individual stores. The plaintiffs argue that the company knew it had problems with the pay and promotion of women and that it "manages its operations and employment practices in a highly uniform and centralized manner." The Ninth Circuit Court of Appeals agreed with the plaintiffs and held that the treatment of the women in the class is similar enough that a class action suit is efficient and appropriate. Wal-Mart appealed the Ninth Circuit's decision paving the way to the U.S. Supreme Court for final review.

Because this is a high profile case, savvy employers should take note and take proactive steps regarding potential discrimination (even unintentional) in their own employment practices. Here are a few tips: Develop (and annually maintain) a formal wage and salary program to eliminate arbitrary decisions which can lead to discrimination; annually audit application and hiring practices; annually review internal promotions and processes; have all terminations reviewed prior to the termination; regularly conduct companywide harassment and discrimination awareness training; and regularly conduct an employee engagement survey to build off of your strengths and identify potential problems before they become a crisis.

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Questions & Answers

By Cascade Staff

Question: Do you advise Employers to address bonus programs in writing?

Answer: Yes. A written policy describing the program's intent, the determination of the bonus fund, eligibility requirements and the timing of bonus payments, will help to limit disputes.

In the absence of a policy statement, questions often arise when there is a separation from employment. Is the departing employee entitled to a bonus? When must any payment be made? Statutory penalties, for failing to pay earned compensation when due, make careful answers critical. A policy shapes employees' understanding and expectations. It is not unusual that, when a bonus dispute occurs and there is no bonus policy in place, the Employer will pay the bonus and then develop a policy to prevent future disputes. A policy should address the purpose of the bonus program. Is a bonus intended to reward past performance? Is it also intended to serve as an incentive for performing well in the future?

How is the fund, from which bonuses are paid, determined? Are bonus payments discretionary? If payments are automatic, based upon calculating the fund (10% of the difference between gross sales and departmental labor costs), overtime pay must be adjusted to reflect increased hourly rates for non-exempt employees. No additional overtime is required if distributions are discretionary.

Who is eligible for a bonus? Must an employee work all, or only a part, of the bonus period? If intended to motivate future performance, must an employee be employed on the last day of the bonus period, or, on the date of distribution? Do employees participate during initial or disciplinary probations? Must an employee be in "good standing?" If so, how is "good standing" defined?

Finally when is a bonus considered to be earned? Depending upon the nature of and purposes for the program, options include: the end of the bonus period; when a bonus is "declared" by management; and, upon the date of eligibility and/or distribution. An eligible, departing employee must promptly receive the bonus when it becomes earned.

It is not enough to simply address "how much" in a bonus program. A policy which also answers the questions of who, why and when, will help ensure that the program achieves its purpose and that exposure to unexpected liability is limited.

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Did You Know?

On average, how many months does it take to become eligible for medical insurance coverage (excluding unions)?

The average non-union organization with 1-500 employees has a 2.41 month waiting period before employees are eligible for medical insurance coverage.

Look here each month for a specific policy or benefit practice and see how your practices compare to other employers just like you.

©2011 Cascade Employers Association. All rights reserved.
SalaryTrends® is a trademark of Cascade Employers Association.
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