engineering compensation in houston and beyond 090814 touhey.pdfaverage age of engineering...

©2009 Pearl Meyer & Partners, LLC

Engineering Compensation in Houston and Beyond

Rice Global E&C ForumAugust 2009

1©2009 Pearl Meyer & Partners, LLC

Discussion Points

About Pearl Meyer & Partners

Historical Base Salary Movement Nationally Among E&C Companies

Historical Base Salary Movement Among Houston E&C Companies

Engineering Rates – E&C v. Energy

E&C In Houston – March 2009 Poll

Base Salary Movement Among College New Hires

Average Age of Engineering Professionals in Houston E&C Market

Opportunity To Address Compensation Inequities

Questions



Founded in 1989, we are a 100 person firm headquartered in New York CityExclusive focus on compensation consultingIndependentFull range of executive compensation and employee pay consulting serviceshttp://www.pearlmeyer.com

Office locations

Representative compensation surveys conducted by PM&PNational Engineering & Construction Services SurveyHouston Engineering & Construction Services SurveyOffshore ConstructionInternational EngineeringOilfield Services SuiteOffshore Drilling SuiteCHiPS Suite

New York ChicagoAtlanta HoustonBoston Los AngelesCharlotte



Chris Touhey, Vice PresidentManages the Houston office Employee Pay and Survey practice

Over 20 years experience in compensation

Extensive experience with design & management of both domestic and international surveys

Managed numerous compensation review projects in a variety of industries

Experienced in the design and implementation of global pay programs


Houston Office – Representative Client Listing


Historical Base Salary Movement Nationally Among E&C Companies


Historical Base Pay Movement – National

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Perc

ent C

hang

e

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8Job Level

Base Pay Percent Change - Drafting / Design

Jun 2005 - Jun 2006 Jun 2006 - Jun 2007 Jun 2007 - Jun 2008 Jun 2008 - Dec 2008


Historical Base Pay Movement – National, continued

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

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Perc

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Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8Job Level

Base Pay Percent Change - General Engineering




0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Perc

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Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7Job Level

Base Pay Percent Change - Process Engineering




-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Perc

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Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7Job Level

Base Pay Percent Change - Project Management



Historical Total Cash Salary Movement Nationally Among E&C Companies

This section was not part of the original presentation and has been added by PM&P at the request of Forum members.


Historical Total Cash Movement – National

Total Cash % Movement Within Selected Engineering Job Families, 2007-2008

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Per

cent

High 10.7% 7.5% 7.5% 7.9% 11.0%

Average 6.9% 3.9% 3.9% 7.8% 6.6%

Low 4.4% 1.6% 1.3% 7.7% 3.4%

Drafting/Design General Engineering Process Engineering Project Engineering Project Management


Bonus Eligibility v. Receiving

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Per

cent

2006 2007 2008

Bonus Eligibility v. Receiving - Drafting/Design

Eligible Receiving


Bonus Eligibility v. Receiving, continued

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Per

cent

2006 2007 2008

Bonus Eligibility v. Receiving - General Engineering

Eligible Receiving



0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Per

cent

2006 2007 2008

Bonus Eligibility v. Receiving - Process Engineering

Eligible Receiving



0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Per

cent

2006 2007 2008

Bonus Eligibility v. Receiving - Project Engineering

Eligible Receiving



0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Per

cent

2006 2007 2008

Bonus Eligibility v. Receiving - Project Managment

Eligible Receiving


Historical Base Salary Movement Among Houston E&C Companies


Historical Base Pay Movement – Houston Market

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

Perc

ent M

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Piping Mechanical Instrument Electrical Civil / Structural ProcessDrafting/Design Job Families

Base Salary Movement - July 2007 to Jan 2009

Jul 07 - Jan 08 Jan 08 - Jul 08 Jul 08 - Jan 09


Historical Base Pay Movement – Houston, continued

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Perc

ent M

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Mechanical Instrument Electrical Civil / Structural ProcessSelected Engineering Job Families




Historical Base Pay Movement – Houston, continued

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Perc

ent M

ovem

ent

Project Engineer Project Manager




Engineering Rates – E&C v. Energy


Engineering Rates – E&C v. Energy (2008)

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

Electric

alMec

hanic

al

Electric

alMec

hanic

al

Electric

alMec

hanic

al

Electric

alMec

hanic

al

Electric

alMec

hanic

al

Electric

alMec

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al

Job Level & Discipline

Rate Comparison By Job Level

Nat E&C Hou E&C Energy

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6


E&C in Houston – March 2009 Poll


March 2009 Poll

Twenty-two E&C firms that either have a large presence in Houston or have their headquarters here

Invited to participate in poll jointly sponsored by Foster Wheeler and URS Washington Division

Topic areas includedNon-executive base salary changes and budgets

Reduction in force / layoffs

Severance benefits

Benefit program changes


Highlights of Poll Results

Non-executive base salary changes / base salary budgetingMore than two-thirds of respondents expected 2009 base salary changes to be significantly less (20% or greater decreases) than in 2008

Almost 60% of respondents had frozen or were considering freezing base salaries

Just over half have delayed or were considering delaying merit increases for 2009– Delays ranged from one quarter to a full year

– Most who were delaying merit reviews were reevaluating in the second quarter

– About 60% were still accruing for merit budgets in the range of 2% to 4%

Pay cutsAt the time of the study, no one had implemented pay cuts

A few were considering pay cuts in the 4% to 8% range

At least two companies have implemented pay cuts in the second quarter

Reduction in force / layoffsMore than 80% of respondents have experienced a layoff or were considering a RIF

Half of those expected further action in the second quarter

Layoffs have affected 8% to 10% of the employee population

Almost one-third have implemented or are considering a reduced hours program

Most firms had not changed their benefit programs at the time


Base Salary Movement Among College New Hires


Oilfield Services v. E&C New Grad Hire Rates, 07-08

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Perc

ent D

iffer

ence

Electrical Mechanical Engineering TechnologyDiscipline

Differential Hire-In Rates For New College Grads, 2007 - 2008

Oilfield Services National E&C


College New Hire Rates Fell In Latter Half of 2008

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Perc

ent D

iffer

ence

Civil Engineering Electrical Engineering Mechanical Engineering

Differential In College New-Hire Rates, Houston E&C Companies

Jan - Jul 2008 Jul 2008 - Jan 2009


Average Age of Engineering Professionals in Houston E&C Market


Engineering Incumbents’ Age – Houston – July 2008

Job Title Job Level

Average Age

Discipline Average Job Title Job

LevelAverage

AgeDiscipline Average

Mechanical Engineering Level 1 26 Process Engineering Level 1 26






Mechanical Engineering Level 7 57 43 Process Engineering Level 7 56 42

Instrument Engineering Level 1 26 Systems Engineers Level 1 26






Instrument Engineering Level 7 56 44 Systems Engineers Level 7 61 43

Electrical Engineering Level 1 26 Offshore / Subsea Level 1 28






Electrical Engineering Level 7 57 43 Offshore / Subsea Level 7 45 42

Civil / Structural Engineering Level 1 26 Project Engineers Level 1 42

Civil / Structural Engineering Level 2 29 Project Engineers Level 2 50

Civil / Structural Engineering Level 3 35 Project Engineers Level 3 54 49

Civil / Structural Engineering Level 4 42 Project Managers Level 1 49



Civil / Structural Engineering Level 7 57 43 Project Managers Level 4 57 54

Overall Average Age, Engineering 44



The past few years of escalating wages, especially in Houston, have resulted in wage compression issues for most companies

Escalating college hire-in rates have placed new-hire compensation at or above 0-2 year engineers

Merit budgets, while exceeding the National norms, have not been large enough to address all the compression problems

In a depressed economy, many are more focused on retaining employment and less focused on wage movement

With minimal salary increase budgets, focus on high performers low in their range as well as internal and external renowned experts

Be sure your performance management system is actually working


Q&A

Questions?

engineering compensation in houston and beyond 090814 touhey.pdfaverage age of engineering...

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