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Total Rewards:

Striking The Right Balance

Patrick Glynn, Senior ConsultantMatthew Shefchik, Senior Consultant

Carlson Dettmann ConsultingA Division of Cottingham & Butler Insurance Services, Inc.

March 10,2020

2

PRESENTERS

Patrick GlynnSenior Consultant

Matt ShefchikSenior Consultant

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HR & WORKFORCE CHALLENGES

HR RISK

• Workplace Culture

• Productivity (Lost Time)

• Employment-Related & Discrimination Lawsuits

• Benefits Costs, Claims, & Liability

• Shrinkage, Theft, Embezzlement

• Training & Competency

• Vacancy & Turnover

RISK CONSULTANTS

40

100

200

300

400

500

600

700

800

900

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

Bureau of Labor Statistics: Job Openings and Labor Turnover Survey (Midwest Data - Seasonally Adjusted)

Layoffs/Discharges vs. Voluntary Quits (In Thousands)

Voluntary Quits Layoffs & Discharges Other Separations

50

100

200

300

400

500

600

700

800

900

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

Bureau of Labor Statistics: Job Openings and Labor Turnover Survey (Midwest Data - Seasonally Adjusted)

Layoffs/Discharges vs. Voluntary Quits (In Thousands)

Voluntary Quits Layoffs & Discharges Other Separations

6

MEASURING EMPLOYER & EMPLOYEE CONFIDENCE IN THE ECONOMY

“What do these statistics tell us about employer and employee confidence in the U.S. economy? Quits tend to rise during an economic expansion and fall during an economic contraction. Therefore, quits can serve as a measure of workers’ willingness or ability to leave their jobs. Conversely, layoffs and discharges tend to fall during an economic expansion and rise during an economic contraction.”

Kimberly Riley, “Measuring Employer And Employee Confidence In The Economy: The Quits-to-Layoffs-and-Discharges Ratio,” Beyond the Numbers: Employment & Unemployment , vol. 7, no. 3 (U.S. Bureau of Labor Statistics, March 2018)

Total Rewards

8

WORLDATWORK TOTAL REWARDS MODEL

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CDC – TOTAL REWARDS METHOD

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SLICING THE TOTAL REWARDS PIE

69%

7%

3%

9%

5%

7%

Employer Costs for Employee Compensation

Wages & Salaries

Paid Leave

Supplemental Pay

Insurance

Retirement & Savings

Legally Required

Source: https://www.bls.gov/news.release/ecec.toc.htm

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“NON-CASH” BENEFITS: FOUR PRIMARY BUCKERS

Employee Non-Cash Benefits

Insurance

Mandatory Retirement

Time Off

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FOUNDATION INGREDIENTS

https://www.recognizethisblog.com/2016/01/need-revisit-maslow/

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EVOLUTION OF ENGAGEMENT (AND BEYOND)

Satisfaction

• Happiness with current job and conditions

• Hygiene factors

• More focused on the individual employee(s)

Engagement

• Active measures to improve

• Commitment to the organization

• Basic psychological needs are met

• Meaning, purpose, passion

Experience

• Entire journey an employee takes with your organization (employee life cycle)

• Pre-hire to post-exit interactions

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THE EMPLOYEE LIFE-CYCLE (GALLUP)

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WHY DO (OR SHOULD) WE SPEND SO MUCH TIME ON ENGAGEMENT?

Source: Gallup “State of the American Workforce” (2017)

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OUR APPROACH TO BALANCING TOTAL REWARDS

Discovery

StrategyImplementation

Monitoring

Discovery

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DISCOVERY

Outcomes

Employee Preferences

External Benchmarks

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PREFERENCE: THE CHANGING OF THE GENERATIONAL GUARD

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MILLENNIALS: BENEFITS & PERKS

Benefit/Perk Gen X & Boomers

Millennials Difference (%)

Paid maternity leave 17% 44% 27%

Student loan reimbursement 19% 45% 26%

Paid paternity leave 15% 37% 22%

Child care reimbursement 8% 30% 22%

Tuition reimbursement 24% 45% 21%

Paid time to work independently on a project of your choosing

24% 42% 18%

Flexible working location where you can choose to work off-site part time

33% 50% 17%

Insurance coverage other than health insurance 43% 60% 17%

Flextime 47% 63% 16%

Flexible working location where you can choose to work off-site full time

31% 47% 16%

Paid vacation 49% 64% 15%

Professional development programs 27% 41% 14%

% employees who would change jobs for benefit or perk

Source: Gallup “State of the American Workforce” (2017)

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EMPLOYEES’ PREFERRED BENEFIT ALLOCATION

Source: Willis Towers Watson’s 2015/2016 Global Benefits Attitudes Survey

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BENCHMARKING: CDC ANNUAL WAGE INCREASE SURVEY: 2019/2020

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BENCHMARKING: WHAT HAPPENS IF STRUCTURAL ADJUSTMENTS DON’T KEEP PACE

70%

7%

3%

8%

4%8%

Private Sector

Wages & Salaries

Paid Leave

Supplemental Pay

Insurance

Retirement & Savings

Legally Required

62%7%

1%

12%

12%

6%

State & Local Gov’t

59%

7%

3%

14%

9%

8%

Private: Union

72%

7%

3%

7%

3%8%

Private: Non-Union

69%

8%

3%

9%

4%7%

All Workers: Full-Time

Wages & Salaries

Paid Leave

Supplemental Pay

Insurance

Retirement & Savings

Legally Required

79%

3%2%

4%2%

10%

All Workers: Part-Time

74%

6%

2%

7%3%

8%

All Workers: 1-99 Employees

65%9%

5%

9%

5%7%

All Workers: 500+ Employees

72%

8%

3%

6%3%

8%

Private: Professional & Business Services

Wages & Salaries

Paid Leave

Supplemental Pay

Insurance

Retirement & Savings

Legally Required

70%

8%

3%

9%

3%7%

Private: Health Care & Social Assistance

66%6%

3%

10%

5%

10%

Private: Transportation & Material Moving

65%8%

5%

10%

4%8%

Private:Manufacturing

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IS PAY A MOTIVATOR?

Insights from “Payoff” by Dan Ariely

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Source: Ariely, Dan (2016). Payoff: The Hidden Logic The Shapes Our Motivations

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WHY DOES IT MATTER?

• Economic Growth + Shrinking Workforce = More Prime Opportunities

• More Opportunities + Aging Workforce = Likelihood for Turnover

• Turnover at Large Levels = Likelihood of Higher Starting Pay

• Higher Starting Pay = Compression with More Experienced Employees

• Compression + Stagnant Wage Structures = Growing Frustration

• Growing Frustrations = Reduced Engagement AND More Turnover

EXAMPLE: Teacher “Free Agency” in Wisconsin

Strategy

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ELEMENTS OF A SUCCESSFUL REWARDS PROGRAM

Internal Equity

External Competitiveness

Consistency of Intent &

Approach

Affordable / Sustainable

Transparency / Communications

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TOTAL REWARDS PHILOSOPHY & POLICY

Good Better Best

Total Rewards

Philosophy /

Policy

• Non-

Integrated

• Why, What,

How

• Total

Rewards

Statements

• Partially-

Integrated

• Values

Alignment

• Unobtrusive

• Manager

Education

• Employee

Communicati

on

• Fully-

Integrated

• Corporate

Social

Responsibilit

y

• Transparency

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WHY A TRUSTED ADVISOR?

• Identify & Resolve Strategic ElementsStrategy

• Depth & Breadth of KnowledgeExpertise

• Removed From Internal PoliticsIndependence

• Reliable (But Expensive) Data SourcesAccess to Data

• Not Vested In Promoting Any AgendaUnbiased

• Focused on Measuring the Right ThingsMetric-Focused

• Balancing Internal & External PressuresComprehensive

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ADVISORS: BENCHMARKING INSIGHTS

Apples-to-Apples Comparisons are Extremely Difficult

• Especially for health insurance

• The key is to find a balance between competitive wages and benefits

Great Analytical Tools

• Cottingham & Butler 3C’s Insurance Analysis (In-Depth, Data-Driven)

• CDC Surveys- Annual Wage Increase Survey (Survey July-August, Results September)- PTO Survey (Coming Soon)

Good Higher-Level Data Sources

• Society for Human Resources Management (SHRM)

• Bureau of Labor Statistics (BLS)

• WorldatWork (fka American Compensation Association)

• Kaiser Family Foundation

• Published or Custom Compensation Surveys

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OPTIONS

Make the “Pie” Bigger

• New revenue streams; increased prices/taxes;

Re-slice the “Pie”

• Rebalance the ratio of compensation to benefits- Cost-shifting/sharing; new markets; consumerism; etc.

Recent Success Stories

• County

• Manufacturer

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A SOUND TOTAL REWARDS PROGRAM IS…

Strategically Aligned

Internally Equitable

Market Competitive

Supportive of Employees

Total Rewards Focused

Legally Sound

Affordable UnderstandableAudited

Regularly

Implementation

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SPECTRUM OF PAY TRANSPARENCY ©

Source: PayScale 2019 Compensation Best Practices Report

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TOTAL REWARDS COMMUNICATIONS

Source: PayScale 2019 Compensation Best Practices Report

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BENEFITS OF FAIR PAY

Source: WorldatWork - Rasch, R. and Szypko, M. (2013). Perception is Reality: The Importance of Pay Fairness to Employees and Organizations.

Questions

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