Transcript CCM: Center for Competitive Management 2008 Edition

May 14, 2008
Southern Nevada Compensation &
Benefits Association
What’s New in Compensation and
Benefits
Patrick Shannon
Nicole Jones-Gyllstrom
www.mercer.com
Topics

How is today’s economy impacting you?

What’s new in compensation?

What’s new in benefits?

Questions and Discussion
© 2008 Mercer LLC. All rights reserved.
1
How is the economy impacting you?
This recession is different
 Globalization, technology, and outsourcing - The globalization of
workforces, coupled with greater use of technology and outsourcing
mitigates the need for drastic, across-the-board responses to the down
turn.
 Targeted strategies - Talent is at a premium; organizations are
employing – and likely not going to abandon – creative, highly targeted
strategies to recruit and retain the optimal workforce for long-term
success.
 Mindset change - There has been a mindset change; organizations
realize that talent is their only sustainable form of competitive
advantage. The typical recession only lasts 11 months.
© 2008 Mercer LLC. All rights reserved.
2
How is the economy impacting you?
Recent survey trends
Are you instituting staffing
level changes?
Did you consider or institute
budget changes in 2008?
10%
5%
34%
60%
6%
85%
No change
Expanding
May freeze or downsize
No change
Considering reduction
Have reduced
Source: Mercer Snapshot Survey, 400 responses, March 2008.
© 2008 Mercer LLC. All rights reserved.
3
How is the economy impacting you?
HR initiatives
• 35% of organizations surveys
reported they are considering
developing new initiatives to
retain high performers
• 28% indicated they are
considering developing new or
enhancing existing variable
pay programs
• 21% have already instituted
changes to improve sales force
effectiveness
Source: Mercer Snapshot Survey, 400 responses, March 2008.
© 2008 Mercer LLC. All rights reserved.
4
What’s new in compensation?
5
What’s new in compensation?
 Continuing emphasis on total rewards
 Strengthening of pay-for-performance
 Increasing use of workforce segmentation
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6
Rewards represent a downstream tool…
Mercer’s Workforce Strategy Model
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7
Three perspectives on total rewards
…and costs are growing
Multiple perspectives
are driving change
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Rewards costs as a percentage
of revenue are escalating
8
What total rewards levers do you have to pull?
Compensation
Benefits
 Base pay
 Guaranteed “bonuses”
 Short-term incentives
 Long-term incentives
 Financial allowances
 Financial recognition programs
 Deferred compensation
 Retirement
You Are What You Reward
 Savings and other wealth creation
programs
 Medical / Dental / Vision /
Prescription Drug, etc.
 Life insurance
 Short and long-term disability
 Accident coverage
 Job-related perquisites
Development & Career
Work Lifestyle
 Performance management
 Time off
 Learning and development
 Wellness programs
 Career opportunity and pathing
 Dependent care
 Tuition reimbursement
 Workplace flexibility
 Mobility opportunities
 Commuter programs
 Workplace facilities and perquisites
 Experiential rewards
 Non-financial and status
recognition
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9
What rewards levers are other companies pulling?
Areas for rewards investments over next 12 months
% of firms
100%
4%
4%
75%
51%
73%
2%
2%
8%
2%
2%
65%
66%
72%
79%
50%
46%
23%
9%
47%
67%
25%
7%
82%
51%
32%
33%
29%
20%
14%
9%
0%
Base salary
increases
Annual cash
incentives
Long-term
incentives
Will invest more
Training
opportunities
Carrer
dev/mgmt
Non-cash
recognition
Investment will remain steady
Work-life
balance
Healthcare
benefits
Retirement
benefits
Will invest less
Source: 2007 Mercer Total Rewards Snapshot survey of 583 firms across the US and Canada.
© 2008 Mercer LLC. All rights reserved.
10
What rewards levers should you pull for what groups?
One size does not fit all
Different goals by age group
55+
40-54
 Planning for
30-39
 Saving for a child’s
18-29
 Balancing work and
 Career advancement
opportunities
 Further education outside
 Being in an environment
with other people from the
same cohort
 Developing a variety of
skills and competencies
(e.g., rotation)
retirement/retiring
family/personal life
 Flexible work hours
 Career advancement
opportunities
 Saving for a child’s
education
 Planning for
education
 Planning for
retirement
 Dealing with the
stress of balancing
work and family/
personal life
 Taking care of an
older parent
 Having company- sponsored
health care options available
during retirement
 Want to simultaneously
support education, work, and
leisure
 Dependent care is an issue
for about 1/3 of mature
workers
 Reduced physical demands
retirement
 Saving for a home
Some goals span groups: predictable income/benefits, having meaningful roles, opportunities for growth, being treated with dignity,
and respect.
Source: Mercer interviews
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11
What rewards levers should you pull for what groups?
Workforce segmentation based on relative value creation
Challenge:
Performance drivers:
employees who create
value for the organization
Performance enablers:
employees who support
value creation
Legacy drivers:
employees who
historically created value
for the organization,
but no longer do
Attract, engage, retain
Support business
Retain institutional
knowledge
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12
How are other organizations segmenting their workforce?
Approximately 40% of organizations use career development, training opportunities
and/or long-term incentive eligibility to differentiate rewards
Job Level
(Excluding
Execs)
Geographic
Location
Business
Unit/Product
Line
Job Family
(Excluding
Sales)
Business
Lifecycle
Base pay competitive
positioning
64%
88%
67%
81%
83%
Short-term incentive
opportunity (e.g., award
targets and mix)
75%
37%
73%
66%
65%
Short-term incentive
eligibility
62%
33%
61%
61%
60%
Career development/
management
41%
28%
43%
44%
57%
Training opportunities
35%
27%
42%
40%
51%
Long-term incentive
eligibility
58%
19%
30%
32%
45%
Long-term incentive
opportunity (e.g., award
targets and mix)
54%
23%
32%
31%
45%
Health and welfare benefits
25%
50%
23%
23%
38%
Retirement benefits
24%
43%
22%
17%
40%
Source: Mercer’s 2007 Snapshot Survey “Measuring the Return on Total Rewards” (US & Canada)
© 2008 Mercer LLC. All rights reserved.
13
What’s new in benefits?
14
What’s new in benefits?
 Health care costs continue to outpace inflation
 Employers continue to shifts costs to employees
 Plan utilization may be falling
 Consumerism and health management strategies
 Other benefit trends
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15
Cost growth has been flat since 2005
Total health benefit cost change vs. workers’ earnings and general CPI
Workers' earnings
Annual change in total health benefit cost per employee
Overall inflation
20.0%
18.6%
18.0%
17.1%
16.7%
16.0%
14.7%
14.0%
12.1%
12.0%
11.2%
10.1%
10.1%
10.0%
8.1%
8.0%
8.0%
7.3%
7.5%
6.1% 6.1% 6.1%
6.1%
6.0%
5.7%*
4.0%
2.1%
2.0%
2.5%
0.2%
0.0%
-1.1%
-2.0%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
* Projected
Source: Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) 1988-2007;
Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April) 1988-2007.
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16
Employee cost-shifting continues in 2007 among large employers
PPO – average in-network deductibles
Individual
Family
$1,134
$995
$1,022
$882
$833
$765
$689
$703
$277
$291
2000
2001
$302
2002
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$343
$366
2003
2004
$413
2005
$426
2006
$473
2007
17
Employee cost-shifting continues in 2007 among large employers
HMO – average copay for physician visits
$17
$16
$16
$15
$14
$12
$11
$10
2000
2001
2002
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2003
2004
2005
2006
2007
18
Majority of employers planned to shift cost in 2008
Large employers
40%
Will raise employee
contribution percentage
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36%
Will raise deductibles,
copays, or other costsharing features
39%
Will not shift cost
19
Slowdown in underlying trend suggests utilization may be falling
Increase in cost predicted for upcoming plan year
10.0%
Before changes*
After changes*
9.8%
9.0%
7.9%
6.6%
6.7%
6.1%
2005
2006
2007
5.7%
2008
* Includes changes in carrier, contribution strategy or plan design.
© 2008 Mercer LLC. All rights reserved.
20
Employer cost management activities helping to slow increases
Large employers
Use strategy
Use strategy and believe it has been successful*
Don’t use strategy
Health
management
Consumerism
80%
52%
20%
48%
* in efforts to control health benefit cost or improve workforce health and productivity
Source: Mercer’s National Survey of Employer-Sponsored Health Plans
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21
Use of specific health management programs
Large employers
Large
employers
Jumbo
employers
Health website
78%
90%
Case management
76%
91%
Nurse advice line
67%
85%
Health risk assessment
56%
78%
End-of-life case management
42%
51%
Health advocate services
38%
47%
Targeted behavior modification
30%
51%
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22
Type of health information provided
Large employers
Information on health conditions
61%
Tool to help select most appropriate plan
30%
Individual provider quality
22%
Individual provider cost
21%
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23
Employers see increased utilization of health information
Among employers that provide health information
Don't know
20%
Increased
significantly
9%
Decreased
1%
Stayed about
the same
21%
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Increased
somewhat
49%
24
Employee reaction to HSA-based CDHP
Large HSA sponsors characterize the response of employees enrolled in the
plan
More negative than
positive/Strongly
negative
7%
Strongly positive
8%
Evenly mixed
between positive
and negative
32%
More positive than
negative
53%
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25
Coverage for part-time employees
Large employers with at least some PTEs
 Make coverage available to PTEs: 62%
 Average number of hours required for eligibility: 23/week
 Of the employers covering PTEs:
– 45% set different contributions for PTEs and FTEs
– 6% offer different plans to PTEs and FTEs
– 88% make coverage available to dependents
 Average PTE contribution, as a % of premium
– 38% for employee-only coverage
– 45% for family coverage
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26
Same-sex domestic partner coverage on the rise, but strong
regional variations persist
Large employers
2006
2007
62%
51%
51%
39%
34%
29%
20%
All large
employers
West
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16% 18%
17%
Midwest
Northeast
South
27
Bariatric surgery coverage declined in 2007
Large employers
2006
49%
26%
28%
2007
54%
24%
18%
Covered, but member
must comply with
behavior modification
program/standards
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Covered the same as any
medically necessary
procedure
Not covered
28
Alternative medicine therapies covered
Offered to employees enrolled in primary medical plan
Large
employers
Jumbo
employers
Chiropractic
85%
91%
Acupuncture/acupressure
33%
46%
Massage therapy
19%
15%
Homeopathy
12%
3%
Biofeedback
9%
9%
13%
8%
None
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29
Use of salary-based employee cost-sharing, by employer size
25%
22%
17%
13%
8%
500-999
employees
1,000-4,999
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5,000-9,999
10,000-19,999
20,000 or more
30
Provide onsite or near-site medical clinics
Large employers
Currently
provide
Considering for
2008 or 2009
Clinic for occupational health services
31%
8%
Clinic for primary care services
14%
10%
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31
Voluntary Benefits on the Rise
 Increased demand for voluntary benefits
– Auto and home insurance
– Legal
– Identity Theft
– Pet insurance
– Critical illness
– Long term care
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32
Long Term Care Offerings Continue to Grow
Plan Types:
 Voluntary
 Employer funded base
with voluntary buy-ups
 Executive carve-out
(employer funded)
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33
Other Work Life Benefits
 On site oil change
 On site car wash
 Dry cleaning pick up
 Gym
 Fitness classes
 Health fairs
 Discounts on products and services
 Day care (onsite or stipend)
 Flu shots
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34
Total Rewards Strategy
Tying it all together
 Personalized benefits communication
– Help in achieving a positive ROI
– Reinforce the company’s commitment to employees and their family
– Improve morale and build stronger, more productive relationships with
employees
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35
#1 Attraction and Retention Tool for Employees
After health plan offerings
Work life balance!
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36
Questions and Discussion
Patrick Shannon, PhD
[email protected]
Nicole Jones-Gyllstrom
[email protected]
Thank you!
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37
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