In This Issue:
Implementing A New Salary Program (A True Story)
By Michelle Toney, Social Communications Manager
About four years ago I revamped the salary structure of the small manufacturing plant where I worked. Located in a rural area, the employees commuted each day from surrounding towns, and many tried to carpool to save money. Money was tight for them, and I had previously worked my way through updating the various benefit programs to improve and offer the employees what they valued and could actually use. However, the salary program loomed ahead of me like a black cloud.
There aren't many more volatile subjects than changing or adjusting someone's pay. It is personal, and affects the most basic necessities that are available for the employees and their families. I felt that choosing a salary structure was a little like choosing what model of car they would own.
I started by participating in a salary survey (this one here) and as a "member" of the organization, in exchange for my information, I received the survey results for free. This helped me compile "market" data for each recently updated job description. Then I got stuck trying to design a salary range. I eventually enlisted the help of the compensation department that conducted the survey.
A few months later we had negotiated and designed a sustainable, fair structure which provided incentives for learning. Each employee would receive compensation based on their job description – any arbitrary decision-making was a thing of the past.
While the executive team breathed a sigh of relief, I began to panic. How was I going to tell the employees that the structure had changed without them feeling like it was all a corporate "smooth over"? I knew the change was honest, and I had good rapport with the employees, but their wages were a sacred thing. As I thought through the issues I got a little more personal by admitting MY wages were a sacred thing. I decided to give them the information I would want personally, and I would deliver it consistently through as many different avenues as necessary.
Two communication methods proved to be the most effective. Several weekly company-wide meetings were held where I explained how the structure worked, and how it tied back to the individual job descriptions. Increases and raises were openly talked about, and questions were encouraged (and answered!).
After the meetings I breathed a sigh of relief, only to be hit with a barrage of questions in person, one-on-one. This was the most effective method of communicating, as I would take the employee back to their supervisor's area, invite other employees to listen in, and I would explain it again with time for any questions or comments that needed to be voiced.
This process took much more time than the actual designing of the structure. The consistency in the message was key. Employees were able to ask questions about terms and words I was using. I wanted to educate them as I learned, too. The questions they asked became the foundation for the changes I made in the New Hire Orientation program to explain to incoming employees how the wage decisions were made.
The only thing left to do was to be consistent long-term. The wages were reviewed the next year on time, exactly on the schedule we had promised. The employees remembered, and took note. While they didn't always agree with every decision made, they knew they could ask and learn.
Looking back I wouldn't change the way I implemented a new salary structure. I would have planned on making even more of my time available for the employees to understand and ask questions. Employees are, after all, the most valuable asset a company has.
Do you need reliable pay information or an updated salary structure? Find those resources here.
"How Does My 401(k) Plan Stack Up?"
By Curtis Farmer, Retirement Program Manager
If you are an employer sponsoring a 401(k) or a similar style of defined contribution plan, chances are good that you've had to make some really tough choices in the past few years. Many employers were forced to suspend or reduce their matching contributions - 23%, in fact, over the last 2 years - as company profits dried up and the economy forced many organizations to do some painful "belt tightening." But as the economic environment improves, more and more employers are revisiting their retirement plans to ensure that they offer a benefit that is competitive with their peers.
According to a study by Aon Hewitt, of those 23% that have cut their 401(k) match, over half (55%) have already reinstated it in some form and another 18% plan to reinstate or increase the match in 2011. Furthermore, the Profit Sharing/401(k) Council of America estimates that the average employer match is now up to 11% of company profits. Since recent studies show that retirement plan benefits rank second only to health benefits in importance to job-seekers, these are key statistics to employers looking to recruit high-level talent.
Also to be considered are your current employees and their satisfaction with the 401(k) plan. In 2008, the average contribution for workers in the U.S. had dropped from 6.8% of salary (in 2001) to just 5.4% of salary. The most common match formula is 50 cents on every dollar contributed up to 6% of salary, which means that many participants have been leaving "free money" on the table when it comes to their company match.
Companies are taking notice of the reduced employee participation and are certainly taking action. In fact, in 2010, 57% of companies were utilizing "automatic enrollment." Basically, an automatic enrollment feature in a 401(k) plan requires the employee to "opt out" of the plan proactively; otherwise that employee is enrolled automatically in the plan at a predetermined deferral rate. Many organizations are now pairing these programs with others that assist the employee with investment choices and calculating savings needs to ensure that participants are getting the most benefit out of their plan.
As Retirement Program Manager, Curtis Farmer administrates Cascade's member retirement plan solution, the Pacific NW Employers 401(k) Plan. If you have questions regarding this article or are interested in learning more about this plan, please contact Curtis.
OFCCP Rescinding Compensation Guidelines
By Carey Klosterman, Human Resouce and Compensation Consultant
Patricia Shiu, Director of the OFCCP, has announced the agency will be proposing to rescind the Standards and Voluntary Guidelines that were established in 2006 in an attempt to design a systematic analysis of pay discrimination. These standards and voluntary guidelines provided methods for OFCCP evaluation of federal contractors' and subcontractors' compensation practices. The standards consisted of a comparison of employees who were similarly positioned in the organization based on the work they performed, the level of responsibility, and the qualifications and skills required to perform the job. The use of multiple regression analyses was also utilized to determine if there was any evidence of compensation-related discrimination.
In a recent notice, the OFCCP claims that these Standards "are too rigid, and undermine OFCCP's ability to investigate, analyze and identify compensation discrimination." Shiu announced that the OFCCP is planning to put together a "new data collection instrument." Unlike the former equal opportunity (EO) survey, "it is something that is going to be new, effective and strategic." An effective data collection tool could assist the OFCCP in targeting those contractors who are continuous violators, help to select contractors for compliance reviews, or provide evidence that an audit is unnecessary.
Employers are left with uncertainty about the compliance standards that will be used in evaluating compensation practices during OFCCP audits. Until the OFCCP provides more detail regarding plans for new processes that will be used to analyze compensation practices, it is important to develop structured compensation plans and regularly audit for the effects of pay discrimination. By establishing consistent pay practices with periodical reviews, and appropriate training for those involved in making pay-related decisions, employers have a much better chance of defending claims of pay discrimination.
Did You Know?
On average, how many companies have a 100% immediate vesting schedule for employer 401(k) contributions (excluding unions)?
On average, about 35% of non-union organizations (with between 1-500 employees) have a 100% immediate vesting schedule for employer 401(k) contributions.
Look here each month for a specific policy or benefit practice and see how your practices compare to other employers just like you.
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