As a compensation professional who tries his best to stay up on what's happening on the business, HR and compensation world, I must say that I'm astonished at how much information and advice is available, especially on-line.  There is an amazing array of information for HR and compensation professionals on the web, but but it requires a fair amount of sifting through the mass of information to find the really valuable pieces of information out there.

One blog posting I read this morning while catching up on the latest happenings really got me going. The post, "Six Pay Raise Alternatives" presents some good issues and ideas to think about, but also floats a fair amount of questionable ideas and advice.  Briefly paraphrasing, here are six pay raise alternatives that were suggested:

1. Pass into your employees some of the perks you as a manager receive. The primary examples used were sporting and concert tickets, such as "a $150 ticket to a Billy Joel concert goes a long way, and provides maximum ROI." First of all, while this would be a nice firm of recognition, it's not a credible pay raise alternative.  Second, if the company is following the IRS code (always a good idea!), this example would create a taxable event for the employee, but I digress...
2. Treat your employee to a luxury meal. Certainly a nice gesture, and one that many employees would appreciate, but this is another form of recognition that should be an ongoing part of being a good manager, by recognizing and expressing appreciation for your employees and their performance. 
3. "Give cell phone breaks." Another nice gesture, but something employers should already be assisting with or providing for employees who are expected to be available or reachable most hours of the day.  This is a mild perk/benefit, but certainly not something virtually any employee would consider to an alternative or substitute for a merit-based pay increase, even a small one (which most of them are today).
4. "Award your employee a new title."  Yikes!  As compensation advisor that spends a good chunk of his time trying to untangle the messes and expectations that lie behind the indiscriminate awarding of job titles, this is really unsound advice (and I'm struggling to stay diplomatic).  Anyone who tells you that job titles are "free" or don't change expecations doesn't understand what they are talking about, because inflated or "vanity" titles almost inexorably lead to internal equity concerns, revised and/or unrealistic pay expectations, etc.
5. "Offer flexible schedule or telecommuting."  Yea, something we can agree on, but not really a pay increase alternative, although this would be considered is a valuable benefit to some.  Many employees appreciate the opportunity to save on commuting time and related time and cost elements of going into the office every day.  This benefit should be reserved for highly motivated self-starters that don't need a lot of prodding or supervision (in other words, the employees you should fight to give a raise to, and to ensure their on-going pay competitiveness).
6. Let your employees come up with their own perk, and if it's a viable option, implement it immediately.  This option has appeal on it's face, but be aware of potential perceptions of internal equity issues or favoritism.  I'm not opposed to individualized rewards and recognition, but most employees are are keenly aware of what they observe around them, and it they sniff "unearned" or obviously inequitable rewards, you as a manger will will suffer from other morale and internal equity concerns that can challenge your credibility and effectiveness.

There are actually some really good nuggets embedded in here: recognition is a good thing, but it's not something that should be done only on special occasions.  It's a part of being a good manager and component of being an employer of choice. Other nuggets: people really appreciate being appreciated, and we recommend showing appreciation as a habit, and not something done on an infrequent or special-occasion basis.

In short, there is a lot of information and advice out there, but be discriminating and choose carefully, because when it comes to base pay and other forms of rewards and recognition, there can be negative or unintended consequences of poorly designed efforts and programs.

For instance, if you're looking to implement a new recognition or incentive program, or a strategy to address pay issues while keeping down fixed cost increases, talk with a specialist or at least someone who truly understands the issues, alternatives and consequences of of various strategies and approaches.  Too much is at stake to to take the chance of implementing poorly-designed programs or un-vetted ideas without considering the consequences.

OK, I'm getting off the soapbox!

2010 Salary Planning Roundup

Many thanks to my blogging partner at the Compensation Cafe, Ann Barnes, who also has her own blog called Compensation Force, for letting me post her excellent summary of the most recent salary planning data for 2010. 

From Compensation Force:

As has become a tradition of sorts here, I have compiled the high level 2010 salary planning data from a number of the most well-known sources and am presenting it here ... for your reading pleasure.

The table below features research on average salary increases (both actual 2009 and projected 2010) from the salary planning surveys published by Watson Wyatt, WorldatWork and Hewitt, organized by employee group.

More information to follow, as more data comes in. Happy Planning!

Preliminary results from Culpepper's annual survey of salary budgets reveal that global base salary increase budgets have risen by an average of 51 percent from 1.89% in 2009 to 2.85% in 2010 (see below for U.S. data). The survey was conducted from late June through mid August, 2009.

Key Findings from the study:

• The number of companies freezing salaries is projected to decline from 37 percent in 2009 to 13 percent in 2010.
• Excluding salary freezes (companies projecting a 0% increase), global base salary increase budgets are projected to increase slightly from 3.18% in 2009 to 3.27% in 2010.
• Base salary increases in the U.S. are projected to increase from 1.63% in 2009 to 2.65% in 2010. Excluding organizations projecting a 0% increase budget, salary increases in the U.S. are projected to hold relatively steady from 3.08% in 2009 to 3.07% in 2010.
• Base salary increases in Canada are projected to increase from 1.13% in 2009 to 2.38% in 2010. Excluding freezes, salary increases in Canada are projected to increase slightly from 2.95% in 2009 to 3.02% in 2010.
• Base salary range structure increases are projected to increase from 1.18% in 2009 to 1.61% in 2010. Excluding freezes, salary range structure increases are projected to decline slightly from 2.84% in 2009 to 2.70% in 2010.
• Additional breakouts and data for over 80 additional countries will be published in the final report, available September 2, 2009.

Salary increase budgets have changed dramatically over the past year. In August 2008, before the global economic crisis unfolded, average base salary increases exceeded four percent (Figure 1) and only two percent of companies were freezing salaries (Figure 2). From late 2008 through mid-2009, the number of companies freezing salaries increased to 37 percent, which drove average base salary increases below two percent.

Overall, projections for 2010 have improved significantly compared to 2009. However, a relatively high number of companies plan to freeze salaries in 2010, and average projected base salary increases are still much lower than recent years.

Data Source: Culpepper Trends Survey of 714 participating organizations reporting salary increase data.

Availability of Final Results:
A comprehensive report with final results and analysis from our recent survey, 2009-2010 Salary Budget & Planning Survey, will be available by September 2, 2009. The final comprehensive report will include data breakouts for the U.S. and Canada by job function/level, number of employees, and industry sector. Additional breakouts will be available for 90 countries and 16 international geographic regions.

Source: Culpepper Trends Surveys, August 2009, www.culpepper.com.

Full disclosure: Culpepper is a strategic partner of the StrategicPay Series.

On August 25th (9am Pacific Time, 12pm Eastern) WorldatWork will offer a FREE webinar outlining the results of their recently-released 2009-2010 Salary Budget Survey (SBS).  You must be a WorldatWork member to attend for free.

If you're not a WorldatWork member, you can obtain a copy of the SBS for $235 at this link.

This is essential information for all HR and compensation professionals involved in compensation budgeting and planning. Hopefully you can either attend the webinar and/or purchase the survey itself.

Either way, follow this blog for more information on salary budget and related trends.

Mixed Signals Complicate HR and Compensation Planning

A variety of major compensation and HR practices studies are showing mixed signals and making current and forward HR and compensation planning more difficult than at any time since the last major recession in the early 1980's.

Some recent studies, since as the Manpower Employment Outlook Survey (MOES) indicate that the outlook for the second half is relatively "stable" (an end to recent declines on the hiring front), while others, such as recent studies released by Mercer and Watson Wyatt indicate the deep impact that recent economic events and developments have had on HR and developing compensation plans and practices.

In addition, WorldatWork recently released the preliminary data for its 2009-2010 Salary Budget Survey, and the data is certainly revealing:

• Of the 2.9% merit increase predicted for 2009 (in the fall of 2008), the actual increase is likely to be closer to 1.9% based on the data from the thousands of companies that participated in the most recent (spring 2009) WorldatWork survey (Keep in mind this is down from around 4% that was predicted at this time in 2008 for 2009.
• Early projections for 2010 are in the 2.8% range for merit increases.  This data is certainly subject to revision due to the major swings in economic expectations over the past several months.
• Salary structure increases are predicted to in the vicinity of 1.8% for 2010, after only about 1.5% increases in 2009 (the lowest in memory).

Due to the highly unpredictable nature of the current economic situation, this is the latest and and most valid information available.  Stay tuned for updates as more tangible and recent data becomes available.

A just-released global Mercer study shows how deeply the economic downturn has impacted most areas of HR, talent and compensation management.  The study, conducted in May of this year, which had over 2,000 worldwide participating organizations, is revealing in how the entire international business community has been impacted by the global recession.

For instance, 82% of respondents report reduced financial performance in 2008 and 2009. Over one-half (58%) of participating organizations say they plan some workforce cuts sometime in the remainder of 2009, although only five percent expect to make cuts of 10% or more to their workforce.

57% of respondents paid smaller bonuses for 2008 performance than in the previous year, and that number is sure to increase in 2009 (our commentary).  Just 20% paid higher  bonuses for 2008 performance than the year prior.

The report covers a number of other areas of interest to HR and reward professionals, including retirement plan impacts, changes to health benefits and employee cost-sharing, and other impacts on HR and reward programs.

This and other recent studies are available for download to all StrategicPay™ Series customers in the "additional resources" folder.

The latest research by Watson Wyatt shows that many employers are actively continuing to alter their hiring and pay plans and planning based on recent economic and business developments.  The just published study, shows the rapidly evolving adjustments employers are making in this recession, the deepest in decades, when compared with similar studies done just a few months ago.

The good news is that many employers seem to think the worst is over or at least that we're near a bottom.  The bad news is that some of the hiring and pay freezes and/or reductions aren't going away anytime soon for many, as the graphic below shows.

"We're not going to go back to the status quo," says Laurie Bienstock, national director of Watson Wyatt's strategic-rewards practice. Perhaps most revealing, of the companies surveyed, only 22% expect to have higher levels of employment 3 to 5 years out, 26% expect no significant changes, while 52% see lower staffing levels.

The survey offered a few hints of good news. About a quarter (24%) of participating companies said they believe their companies' results had already "bottomed out," compared with 13% in a similar survey conducted by Watson Wyatt in April.  And over half (55%) of companies that have frozen salaries or hiring said they plan to lift those freezes over the next 12 months.

It's looking like this recession may leave more of a lasting impact hiring, pay practices and plans than other recessions in the past few decades.