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Compensation Trending in 2012:
Salary Increases vs. Variable Pay



The U.S.’s economic downturn is still having an effect on the way companies are doling out pay increases. Hay Group, a pay consultancy firm, determined through their research that a pay increase of 3% is what U.S. employees can anticipate for 2012. This forecast is one that will most likely be seen by middle management, and those in the supervising and clerical capacity. However, experts warn that the 2012 predictions could end up being less than the original projections. The 3% pay increase, while consistent, falls short of the 4% pay raises that took place from 2005-2008.
In order to compensate for this, many U.S. companies are relying on incentive programs and variable pay for their employees. These types of programs peaked in 2011, reaching an all time high. The purpose of these is twofold: (1) they motivate employees to produce, and (2) they give employers an opportunity to compensate depending on the accomplishments of the individual and the company as a whole. According to Ken Abosch, Aon Hewitt’s compensation group leader, these types of incentive programs “create a need for performance discussions throughout the year, so employees know what they are doing well and areas for improvement in order to maximize productivity and potential pay opportunity.”

The chart below shows historical increase data compiled by Aon.

Historical U.S. Salary Increases

 

2007

2008

2009
(Record Low)

2010

2011

2012 (Projected)

Executives

4.0%

3.9%

1.4%

2.4%

2.8%

2.9%

Salaried exempt

3.7%

3.7%

1.8%

2.4%

2.7%

2.9%

Salaried nonexempt

3.6%

3.7%

1.9%

2.4%

2.8%

2.9%

Nonunion hourly

3.6%

3.6%

2.0%

2.4%

2.7%

2.9%

Union

3.3%

3.4%

2.2%

2.5%

2.6%

2.7%

Source: Aon Hewitt


Despite all the projections, there are some U.S. cities that will see higher than normal salary increases. Salaried exempt workers of Detroit could see a 4.0 percent pay increase and Dallas, a possible 3.4 percent increase. These two cities top the list according to a survey by Aon Hewitt. Referring to the same survey, the fields of lowest projected salary increase could be in Government (1.7 percent), Building Materials (2.5 percent) and Research/ Development (2.5 percent) to name a few.
It appears the U.S. is making strides in recovering economically, as more organizations were able to abate salary freezes in 2011 and the expectation is that this will continue into 2012. Still, the main focus for now appears to be implementing and managing reward programs that benefit both the employer and employee. HRPG provides full compensation consultation services. Contact us at 619-421-0074 for more information and to discuss your compensation needs.


Outsourcing the Payroll Function
By Fred Patterson, District Sales Manager, Amcheck
A good payroll system encompasses the payment of employees, the filing of employment taxes and the maintenance of employee records such as W-2 withholding and benefits information. Many payroll accounting software packages offer features that will allow users to input this data into a payroll system database, but it can get complicated. Most companies find it easier to hire a qualified payroll service provider to handle their payroll.
Once all the deductions are made and sent to their proper accounts, employee payroll checks can be issued. Payroll data for every employee is stored in a database until the end of the year when wages and withholding information is provided to the government.
It still is possible to use a traditional payroll ledger to calculate wages, but keeping up with government regulations is so time-consuming that using a preferred payroll company like AmCheck is vital to productivity. According to the Department of Labor, it takes 55 minutes per employee to process a payroll.
To help reduce that time, payroll services usually provide software with features to automatically help employers track employee hours, their employment status and tax information. This software also makes the payroll distribution process much easier, since the data is transferred automatically to the payroll service provider who keeps track of both withholding and regulatory changes.
Fred Patterson III is a District Sales Manager for AmCheck, a payroll solutions firm with offices throughout the western United States. Fred may be reach at fred.patterson@amcheck.com, (619) 595-7900.


Reprinted with permission:
The Generation Factor-
Understanding how differences in generations affect your workforce
By: Berkshire Associates Inc.
Outside your office door, everything may appear fine, but tension may be brewing among your Baby Boomer, Generation X, and Generation Y workforce. How can managers and HR work together to optimize each group’s strengths while creating a productive and satisfying environment for all three styles?
The core of this tension originates from differing work values and perceptions of relationships with employers. Baby Boomers lean towards job security, corporate loyalty, formal hierarchy, long hours, and advancement. Generations X and Y are cautious of corporate loyalty due to their witness of mass layoffs and company closures as they entered the workforce. However, Generation Y places a great deal of importance on close, open relationships with supervisors and coworkers. Baby Boomers tend to see Gen Yers as lacking commitment and appearing entitled, while Gen Yers perceive their counterparts as self-absorbed workaholics. What is the best way to communicate the values and vision of the organization? Let’s take a moment to explore what is unique about these three generations.
Baby Boomers are people born between 1943 and 1960-1964 (depending on the source).

Baby Boomers grew up in a time of monumental changes; civil rights movement, sexual revolution, space travel, assassinations, and the draft, just to name a few. Boomers have often found it difficult to manage their time and money due to a situation other generations have not had to deal with. The Baby Boomers’ parents are living longer, their children are seeking more education, and they themselves are having children later in life. Boomers have to care for elderly parents, as well as their own children. They are now called the “sandwich” generation.
They began their careers during the industrial age and were thrown into an era where brainpower is more valued than brawn. They have had to adapt rapidly from manual processes to automation and computerization.
Due to the sheer number of them (76 million), Boomers have always been assertive and competitive. They are hardworking individuals who believe strongly in a work ethic that demands time and energy. Status, and the symbols that go with it, is extremely important and defines their worth.

Characteristics of Baby Boomers
Workaholics: Boomers live to work. They feel it’s important to pay their dues and work their way up the corporate ladder. Boomers expect to make sacrifices to receive the prestige and status work affords. Their commitment to the business is very strong.
Great knowledge of the business: Due to their work ethic, they are very involved in all levels and aspects of the business.
Teamwork is essential: Personal relationships with coworkers are important.
Challenge authority: Boomers may not want to totally rock the boat, but may question groupthink. They lived though events such as the Vietnam War and Watergate, causing them to become less trusting of authority.
Need for personal growth: Often Boomers did not follow the career path in which they were most interested, but the ones that were best economically.
Civic responsibility: They exhibit enthusiasm for causes.

Baby Boomers in the workplace
Above all, Boomers are loyal to their companies. In them you will find a wealth of knowledge on the “hows and whys” to which the next generations were not privy. They understand organizations’ intricacies and can lend their knowledge to whoever is willing to listen. They are often rated as great managers and mentors.
To other generations, Boomers may seem stodgy and set in their ways, unwilling to change. However, this is only because Boomers tend to be very methodical and need to know the facts before making a decision. They have worked throughout their organizations and are willing to wait their turn, expecting their efforts and knowledge will pay off in the end.
Generation X are people born between 1960 and 1976-1980 (depending on the source).

Gen Xers were considered latchkey kids. They grew up in a time of corporate layoffs and company instability, and therefore had to be very self-reliant. Generation X is independent, enjoys informality, believes in diversity, is pragmatic, and is technologically competent. They want to build a repertoire of skills and experiences they can take with them if they need to, and they want a career path with increasingly interesting steps along the way.

Characteristics of Gen Xers
Not big on loyalty to a company: Many will switch jobs several times seeking positions with more responsibility and opportunities for personal growth.
Suspicious of hierarchy: Gen Xers want to be seen as equals. They are comfortable in expressing their opinions to those in charge, since rank means very little to them. Teamwork is a very important aspect of their jobs.
Believe in work-life balance: Being able to spend time with family and pursue other interests is also important to this group.

Generation X in the workplace
This generation saw layoffs and a downward sloping economy. Therefore, they have loyalty to their team members and a good boss, but not necessarily to a company. They are individualistic and dislike anyone looking over their shoulders. At the same time, they encourage feedback and are quick to give you their opinions. Their careers may be filled with several moves, not all going in one fluid direction. Part of their goal is to learn new things and have many experiences along the way.

Turning to Generation Y
Gen Yers are people born between 1977 and 1994 (depending on the source).
This generation makes up over 20 percent of the overall workforce with approximately 70 million people. They are the children of the Baby Boomers and some older Generation X members. They grew up in an age of technology, in a time of educational availability, and with parents who wanted to give them everything.
Growing up in the age of technology allowed this generation to experience instant gratification. As they grew up, technology got faster and more efficient. Everything from computers and the Internet, downloading music, and instant messaging gave this generation the luxury of rarely having to wait. Gen Yers were in high school with cell phones and lived in houses with computers and Internet access before they went off to college. Chances are they even had a computer to take with them to college.
This generation grew up with very little free time. As children they were shuttled from scouts to dance class, from music lessons to soccer practice. Almost every minute of their day was structured by working parents who wanted to make sure their kids had every opportunity to be well-rounded. This idea carried over from elementary school to high school where the Yers’ main objective was building their résumés to ensure acceptance into a reputable college. Eighty-five percent of Gen Yers attend college full-time after graduating high school. And now with degrees in hand, Generation Y is entering the workplace with new values and new ideas.

Characteristics of Generation Y
Impatient: Raised in a world dominated by technology and instant gratification.
Skeptical: In recent years there has been more scamming, cheating, lying, and exploiting than ever from the major figures in the media. This includes everyone from rock stars to Presidents.
Blunt and expressive: Self-expression is favored over self-control. Making their point is most important.
Image-driven: Making personal statements with their image is very important.
Adaptability: Generation Y tends to be adaptable and comfortable in an array of situations.
Technologically savvy: They grew up in the age of technology and are taking advantage of it.
Ability to grasp new concepts: This is a learning-oriented generation.
Efficient multi-taskers: They often do more, and will do it faster and better than their competition.
Still young: Although they have a “seen-it-all, done-it-all” air about them, lack of life experience means they don’t know everything yet. They are aware of this and are not afraid to ask questions. For this generation, it is better and more time-saving to ask questions, than to waste time trying to figure it out.

What Makes Them Tick in the Workplace?
The Gen Yers are bringing a fresh perspective and new life to the workplace, but managers and employers are having difficulty figuring out how to reap the benefits of this new generation. Generation Y has a whole new set of values and motivators that need to be addressed in order to keep them engaged and satisfied.
This generation values education. They have a need for ongoing learning and challenges. It is important for employers to give members of this generation challenging projects to prevent boredom. They are happy as long as they are being stimulated and are able to build upon what they already know.
The Gen Yers desire immediate responsibility. They are a highly educated generation and want the opportunity to use their knowledge. They want to make an impact immediately on projects and look for immediate gratification in excelling. This generation is very attracted to opportunities for work-life balance. They aren’t driven only by the large paycheck but also with flexibility for their life outside of work. Work is only one component of a “well-rounded” life for this generation. Opportunities for telecommuting and flexible work schedule can result in better performance as well as higher retention rates.

Overview
What makes these generations stay and work in harmony? Is it corporate loyalty or the belief their job is making a difference? Corporations with a multi-generational workforce need to strike a balance between the groups. Baby Boomers want to feel valued and vested in their organizations. They believe their continued loyalty should be rewarded with seniority and company investments. Gen Xers want to feel they are growing, at work and in other pursuits. Flexibility and freedom is their reward. Gen Yers in turn do not tend to focus their loyalty to a corporate brand, but to companies who are socially vested within the community. Find out the organizations and causes in which your employees are interested and provide the opportunity for employees to spend a certain amount of time volunteering. Ultimately, the generations need to experience a sense of ownership of their positions. Encourage participation in products, procedures, and marketing allowing employees to see how they tie into the success of the company. Help employees see how meeting their individual goals directly impact these efforts.
Turning to growth opportunities as a tool for retention—what happens when what is good for one generation is not always a driver for the others? While all the generations value promotional opportunities, they perceive the path to promotion differently. Baby Boomers see a clear career path achievable through tenure, hard work, and loyalty. Gen Xers may take several different routes with stops and starts along the way. Gen Yers are more invested in companies who reward top performers individually, not just in increased responsibility, but with time and reimbursement for additional education. They also value performance-based cultures where results count more than seniority. This means companies need to outline career progression while providing perks for employees who strongly add to the bottom line. It is wise to invest time finding out what motivates your employees—it may be promotional opportunities as well as work-life balance.
As an employer you will also need to be aware of the best way to train the three generations and how to disseminate general information. Baby Boomers tend to enjoy information presented in annual meetings and newsletters. Gen Xers want a more casual approach with one-on-one interaction, while Gen Yers utilizes electronic means such as blogs, podcasts, and streaming video as a means to gather all sorts of information. This will also satisfy their desire to feel as if they have direct access to information from the decision makers in your organization at any point in time. Perhaps a blended approach would be the solution. Annual “State of the Union” addresses can satisfy the Boomers’ desire to gather information from a more traditional means, while quarterly updates can be available on the Intranet and other downloadable media.
When it comes to training, Generation Y, Generation X, and Baby Boomers receive and retain new information differently. Baby Boomers tend to learn best from round-table discussions, Gen Xers learn from an interactive relationship, while Gen Yers learn best in more unstructured and interactive brainstorming sessions. Using a variety of training methods can offset these differences. Consider structured training sessions and meetings incorporating brainstorming aspects and information sharing. This will allow you to capitalize on the experience of the Baby Boomers while opening the floor to innovative ideas of Generation X and Y employees. A strong leader who is well versed in the learning styles of these generations is crucial in the design and facilitation during the meeting or class.
Understanding the differences between these three groups will allow you to utilize their experiences and diverse views effectively. It’s your job to figure out how you can best build your environment to balance the needs of cross-generational workers in your company. Just remember not all individuals will fall perfectly in-line with the characteristics of their generation, but all will benefit from variations in communication styles and new management techniques.

About Berkshire Associates:

Berkshire Associates is a human resource consulting and technology firm specializing in helping companies build the ideal, balanced workforce. As an industry leader, Berkshire provides the latest tools and services for affirmative action, applicant management, compensation management, workforce planning, diversity, and professional training. For over 25 years, Berkshire has serviced the nation’s most recognizable companies; and as a result has mastered providing clients with cost-effective solutions to everyday human resource challenges.





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