Perhaps it doesn’t pay to be the boss. Or does it?
According to a WorldatWork “Total Salary Increase Budget Survey,” exempt salaried employees can expect a 4.5 percent increase in 2001 compared to a 4.4 percent increase for those in the officer/executive category.
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But annual salary is but one of many avenues of compensation — at least for those in top management positions.
Judith Fischer, managing director of Executive Compensation Advisory Services, an Alexandria, Virginia-based subsidiary of Drake Beam Martin, the international corporate development company, points out that freezing, holding a tighter line on the salaries of upper management is but a small piece of a larger puzzle.
“Conceptually, it’s a nice graceful move,” said Fischer. “But it doesn’t mean as much when bonuses and shares are considered. There are so many ways of getting compensation that executives have as opposed to the rank and file or middle management.”
WorldatWork, an Arizona-based not-for-profit association, based its initial findings on an electronic sampling of a portion of more than 2,500 survey participants. The complete survey is to be released in August.
“What this tells us is that is that the importance of attraction and retention of key talent is reaching all aspects of compensation, benefits and total rewards,” said Anne C. Ruddy, executive director of WorldatWork. “We suspect a big part of this shift is due to the addition of IT talent in the exempt employee category.”
A survey suggesting that executives might receive smaller pay increases than other workers will come as no surprise to executives at Fidelity Investments, including those at the company’s Smithfield facilities. According to a recent story in the Boston Herald, Robert L. Reynolds, Fidelity’s chief operating officer, distributed a memorandum announcing that 2001 merit raises for all workers earning more than $75,000 were effectively being killed.
Reynolds’ memo, according to the Herald, blamed “less-than-buoyant market conditions.”
Stephen Mascena, director of development for Drake Beam Morin’s Providence and southeastern Massachusetts region, said compensation matters clearly vary from company to company.
Mascena points out that while Fidelity may be freezing the wages of its top people, Coca Cola was reportedly doing just the opposite. Rank and file wages were remaining more constant, while bonuses at the top level continued to flow.
That too, he said, should come as no surprise.
“For years, top management and rank and file have worked off different criteria,” said Mascena. “It depends on the criteria being used to determine whether you are getting more or less.”
WorldatWork’s research suggests a reflection of a slowing U.S. economy. Salary increase numbers are showing a decline in their growth rate over the next year in all four categories: nonexempt hourly nonunion; nonexempt salaried; exempt salaried and officer/executives.
The growth rate of each of the employee categories is down from last year, and all four are projected to see lower growth rates again next year. The most significant drop is expected to be in the officer/executive category, who were projected a year ago to receive a 4.7 percent increase this year. The new figures indicate that they will actually receive a 4.4 percent increase in 2001. By contrast, officer/executive received a 4.8 percent increase in 2000.
“The economic downturn appears to be catching up with salary budgets, as we can see that companies are expecting to reduce increases over the next year in all categories,” said Ruddy. However, the importance of finding and keeping key talent seems to be stronger than keeping executives happy.”
In the end, it is the economy that is shaping compensation issues — and it is an economy that is harder to predict than ever. As a result, it is hard to tell which employees will meet their goals — and reap the sometimes lucrative benefits as a result.
“We really are running blind in terms of what is happening with the economy,” said Fischer. “What the end of the year will look like is anybody’s guess.”
Retention programs grow
WorldatWork has also released the findings of its second annual “Retention Bonus Survey.”
A preamble to that report suggests; “Companies will need to cut the excess and rigorously watch the bottom line, but in regard to the key talent the labor market remains tight and shows no signs of significant decrease. The highly skilled workers even more than before, will feel the need to pursue their best interests and react as a free agent. Company loyalty will be an ever-decreasing element in the downsizing frenzy. It is now even more important to retain those individuals that will lead the way for the survivors to strengthen and maneuver through the current economic downturn.”
The key findings of the study included:
- 45 percent of participants have implemented a retention bonus program in the past year.
- The number of companies that have a retention bonus program (34 percent) increased 10 percent from 2000 to 2001.
- An average of 75 percent of the cash retention bonuses were paid out in a lump sum (not including nonexempt, part-time and contract workers) and that number was consistently high when looking at all of the demographic breakdowns.
- 56 percent of the respondents offer retention bonuses to upper management, an increase of 28 percent from 2000.
- Information technology employees lead the categories with 73 percent of companies including this group in their program.
- 31 percent tied a cash bonus to length of service, an increase from the previous year of 19 percent.
