MERCER S 2016 COMPENSATION PLANNING SEMINAR

Transcription

1 HEALTH WEALTH CAREER MERCER S 2016 COMPENSATION PLANNING SEMINAR DOING MORE WITH LESS SEPTEMBER 2015 Calgary

2 TODAY S PRESENTERS PRESENTERS GRANT ASHLEY ARRON DOBSON MERCER

3 TODAY S DISCUSSION 01 ECONOMIC OVERVIEW 02 HIGHLIGHTS FROM THE SURVEY 03 INSIDE EMPLOYEES MINDS MERCER

4 ECONOMIC OUTLOOK MERCER MERCER

5 THE GLOBAL ECONOMIC OUTLOOK GDP % Growth 7% 6% 5% 4% 3% 2% 1% 0% -1% Source: Consensus Economics Japan Euro zone North America Latin America Asia Pacific Asia Pacific (excl Japan) MERCER

6 CANADIAN ECONOMIC AND MARKET CONTEXT OVERVIEW There are signs that Canada may bounce back in 2015 CURRENT ECONOMIC STATE 3.5% 3.1% -6.7% 185,000 Expected World GDP growth in 2015 Expected increase in consumer spending Decrease in Canadian exports in May 2015 Potential loss of direct and indirect jobs in oil and gas industry from $31B reduction in expenditures MERCER 2015 Sources: Economist Intelligence Unit 2015, The Conference Board of Canada Canadian Outlook Executive Summary Summer 2015, 5 Petroleum Labour Market Information Falling Oil Prices and Decreased Industry Spending Employment Impacts May 2015

7 CANADIAN ECONOMIC AND MARKET CONTEXT INDICATORS 7.1% 6.2% 7.0% 6.9% 6.9% 6.9% 2.0% 2.2% 2.2% 2.4% 1.6% 2.1% * 2016* GDP Unemployment 80% of companies reported challenges in recruiting candidates with critical skills 3.1% 2.9% 3.0% 3.2% 3.2% 3.0% 2.8% 2.8% 0.3% 1.8% 2.9% 1.5% 1.0% 1.9% 1.5% 2.3% * 2016* Salary Increases Inflation Unemployment is expected to fall below 6% by Labour force participation is currently at 66% and expected to remain flat for the next few years. Sources: The Conference Board of Canada Canadian Outlook Executive Summary Summer 2015, MERCER 2015 The Conference Board of Canada The Canadian Context for Strategic Workforce Planning November

8 HIGHLIGHTS FROM THE SURVEY MERCER MERCER

9 MERCER RESEARCH MERCER

10 PARTICIPANT PROFILE 590 PARTICIPANTS % 7 Financial Services % 5 Insurance % 8 High Tech % 6 Consumer Goods 18 % Services (Non-Financial) 16 % Energy MERCER % Other Non Manufacturing Government/Public Administration (3%) Life Sciences (4%) Mining & Metals (4%) Other Durable Goods Manufacturing (6%) Other Non Durable Goods Manufacturing (3%) Retail & Wholesale (7%) Transportation Equipment (1%)

11 PARTICIPANT PROFILE 5,000 AND OVER15% 15% LESS THAN 100 EMPLOYEES 3,000 4,9997% NUMBER OF EMPLOYEES 17% ,000 2,99923% % 9% MERCER

12 EMPLOYERS REMAIN CAUTIOUS SALARY BUDGETS REMAIN STEADY CANADA (ALL INDUSTRIES, ALL LOCATIONS, EXCLUDING ZEROS) YEAR ALL EMPLOYEES EXEC MGMT PROFESSIONAL CLERICAL OPERATIONAL % 2.8% 2.8% 2.8% 2.7% 2.7% 2015 (ACTUAL) 2.8% 2.8% 2.8% 2.8% 2.7% 2.7% 2014 (ACTUAL) 3.0% 3.2% 3.1% 3.0% 3.0% 2.9% 2013 (ACTUAL) 3.2% 3.4% 3.3% 3.1% 3.2% 3.0% 2012 (ACTUAL) 3.2% 3.2% 3.3% 3.2% 3.2% 3.1% MERCER

13 EMPLOYERS REMAIN CAUTIOUS RESULTS INCLUDING FREEZES CANADA (ALL INDUSTRIES, ALL LOCATIONS) YEAR ALL EMPLOYEES EXEC MGMT PROFESSIONAL CLERICAL OPERATIONAL 2016 EXCL. 0 S 2.8% 2.8% 2.8% 2.8% 2.7% 2.7% 2016 INCL. 0 S 2.6% 2.6% 2.6% 2.6% 2.6% 2.4% 2016 % OF FREEZES 3% 6% 4% 4% 3% 5% MERCER

14 PROVINCES FOLLOW HISTORICAL TRENDS 2015 PROJECTIONS Territories 3.0 Other British Columbia Greater Vancouver Greater Calgary Other Alberta 3.1 Saskatchewan Manitoba Other Ontario Other Quebec Greater Montreal Atlantic Canada Greater Toronto MERCER

15 MORE BALANCED INCREASES AMONGST PROVINCES 2016 PROJECTIONS Territories 2.6 Other British Columbia Greater Vancouver Greater Calgary Other Alberta 2.7 Saskatchewan Manitoba Other Ontario Other Quebec Greater Montreal Atlantic Canada 3.0% Greater Toronto MERCER

16 DISTRIBUTION OF 2016 BASE SALARY INCREASES 2016ProjectedBaseSalary Increase(%) MEAN: 2.8% MEDIAN: 3.0% MERCER

17 FACTORS INFLUENCING COMPENSATION DECISIONS RETENTION CONCERNS 60% OVERALL ECONOMIC CLIMATE 62% ATTRACTION CONCERNS 53% NEED TO STRENGTHEN THE PERFORMANCE-BASED CULTURE AND DELIVER PAY FOR PERFORMANCE (49%) CONCERNS REGARDING EMPLOYEE ENGAGEMENT LEVELS (44%) DESIRE TO PROVIDE CAREER MOBILITY AND ADVANCEMENT OPPORTUNITIES (37%) OTHER (6%) MERCER

18 LOOKING AT HISTORICAL TRENDS 2015 PROJECTIONS 3.7% 3.1% 3.1% 3.0% 3.0% 2.9% 2.9% 2.7% 2.7% 2.7% ENERGY OtherNonDurable GoodsMFG Services (NonFinancial) HighTech OtherDurable GoodsMFG FinancialServices Insurance Retail&Wholesale ConsumerGoods PublicSector 2015 PROJECTED MERCER

19 LOOKING AT HISTORICAL TRENDS 2015 ACTUALS 3.1% 2.8% 2.6% 2.8% 2.8% 2.7% 2.7% 2.5% 2.9% 2.5% ENERGY Other Non Durable Goods MFG Services (Non Financial) High Tech Other Durable Goods MFG Financial Services Insurance Retail & Wholesale Consumer Goods Public Sector 2015 PROJECTED 2015 ACTUAL MERCER

20 ARE WE PESSIMISTS OR IS THIS THE NEW REALITY? 2016 PROJECTIONS 2.9% 2.7% 2.6% 3.0% 2.8% 2.8% 2.7% 2.6% 2.9% 2.6% Energy Other Non Durable Goods MFG Services (Non Financial) HIGH TECH Other Durable Goods MFG Financial Services Insurance Retail & Wholesale Consumer Goods Public Sector 2015 PROJECTED 2015 ACTUAL 2016 PROJECTED MERCER

21 HOW EMPLOYEES MOVE THROUGH THE RANGE 42% of organizations use a merit matrix Base Salary #1 way to differentiate MERCER

22 EXAMPLE MERIT MATRIX Position in Range / "Compa-Ratio" 80% - 90% 90% - 110% 110% - 120% 5 Highest 6% 5% 4% Performance Rating 4 Next Highest 5% 4% 3% 3 Middle 4% 3% 2% 2 Low 2% 2% 0% 1 Lowest 0% 0% 0% MERCER

23 FACTORS EMPLOYERS CONSIDER WHEN DEVELOPING A MERIT MATRIX 92% 77% 61% 24% 14% 7% BASE SALARY INCREASE BUDGET DISTRIBUTION OF EMPLOYEES WITHIN THE BASE SALARY RANGE DESIRED PERFORMANCE DIFFERENTIATION TIME TO MIDPOINT/ JOB RATE YEAR-OVER-YEAR ACTUAL INCREASES IN PAYROLL COSTS TIME TO MARKET ZONE MERCER

24 DIFFERENTIATION IN PERFORMANCE AND REWARDS 2015 ACTUAL PERFORMANCE RATING 57% 26% 3% 0.2% 8% 1.1% 2.6% 3.6% 7% 4.6% LOWEST LOW MIDDLE NEXT HIGHEST HIGHEST AVERAGE SALARY INCREASE MERCER

25 AVERAGE PERFORMERS CAN EXPECT DIFFERENT INCREASES 2015 BASE SALARY INCREASES 3.1% 2.4% 1.9% DEVELOPING ZONE (80 90%) MARKET ZONE (90-110%) PREMIUM ZONE (110% OR GREATER) MERCER

26 IDEAL VS. ACTUAL NUMBER OF YEARS TO MIDPOINT/JOB RATE 70% 60% 50% 61% 47% % OF ORGS 40% 30% 20% 31% 23% 26% 10% 0% 6% 5% 2% <3 YEARS 4 6 YEARS 7 9 YEARS >10 YEARS IDEAL % ACTUAL % MERCER

27 STRUCTURE ADJUSTMENTS MOVE SLOWER THAN BASE SALARY INCREASES BASE SALARY INCREASE STRUCTURE ADJUSTMENT 2.1% 2.8% MERCER

28 OFF-CYCLE ADJUSTMENTS ARE TYPICALLY USED TO RECOGNIZE PROMOTIONS TEMPORARY ASSIGNEMENT OTHER 15% 1% RETENTION 23% 57% PROMOTION MARKET COMPETITIVENESS 17% MERCER

29 INSIDE EMPLOYEES MINDS MERCER MERCER

30 INSIGHTS COME FROM MERCER S INSIDE EMPLOYEES MINDS SURVEY Proprietary research on employee views on work, including engagement, health, and retirement More than 80 survey questions covering pay, benefits, careers, leadership, performance, engagement, etc. Conducted in early 2015 among nationally representative sample of Canadian workers Survey was also conducted in the US Reflects Canadian workforce demographics (age, gender, job level, in public and private sectors) Conjoint analysis to rank what employees value the most MERCER

31 WHAT S ON EMPLOYEES MINDS: I M SATISFIED BUT LEAVING Two out of five private sector workers in Canada are seriously considering leaving Three out of five who say they are satisfied with the type of job they do are considering leaving Base pay continues to be most important reward element, followed by retirement, and lowcost health care MERCER

32 OVERALL ENGAGEMENT TRENDS Private Sector Change 2011* 2015* Public Sector 2015 I am proud to work for my organization 66% 60% 62% My work gives me a feeling of personal accomplishment 67% 59% 65% I would recommend my organization to others as a good place to work 66% 52% 56% * Private sector employees only for trending purposes Inside Employees Minds Canada, 2011 and 2015 MERCER

33 THE MARKET CONTEXT ECONOMIC CONCERNS CARRY OVER TO JOB INSECURITY LACK OF ECONOMIC CONFIDENCE Growing economic pessimism Concern about job security THE WAY EMPLOYEES SEE IT NOW: I EXPECT MINIMAL ECONOMIC GROWTH, AND POSSIBLY EVEN RECESSION, OVER THE NEXT YEAR. BECAUSE OF THIS AND OTHER CONCERNS IN MY JOB, I AM RECALIBRATING TO THE NEW NORMAL. MERCER

34 JOB SECURITY DIVERGING VIEWS BASED ON POSITION AND SECTOR HOW CONCERNED ARE YOU THAT YOU MAY LOSE YOUR JOB IN THE NEXT 12 MONTHS? RESPONDENTS OVERALL SAYING THEY ARE VERY CONCERNED: Very concerned 7% 14% Somewhat concerned Not very concerned Not at all concerned 20% 26% 35% 32% 34% 32% Senior mgmt Mgmt Non-mgmt 9% 13% 27% Private sector Public sector MERCER

35 THE STATE OF ENGAGEMENT: REDEFINING THE EMPLOYMENT VALUE-PROPOSITION BROAD ISSUES Engagement Paradox Public/ Private Split Generational Divide SPECIFIC ISSUES Bullish on Benefits Retirement Readiness Talent Challenges MERCER

36 ENGAGEMENT PARADOX: SATISFACTION NOT ALWAYS THE PREDICTOR OF COMMITMENT In Canada, 2 out of 5 private sector employees are seriously considering leaving their organization 40% of private sector employees are looking to leave, compared with 36% in % of public sector workers today are seriously considering leaving Even workers who are satisfied with their job and organization are eyeing the exits MERCER

37 SATISFIED AND LOOKING TO LEAVE 35% Among the 35% of all workers who are seriously considering leaving their job: 51% 43% 42% of those very satisfied with career opportunities who strongly agree that their organization as a whole is well-managed who strongly agree that they have sufficient opportunity for growth and development in their organization MERCER

38 SATISFIED AND LOOKING TO LEAVE SENIOR MANAGEMENT SENIOR MANAGERS ARE MORE THAN TWICE AS LIKELY AS NON- MANAGEMENT EMPLOYEES TO BE SERIOUSLY CONSIDERING LEAVING THEIR ORGANIZATIONS AT THE PRESENT TIME Senior management 67% 85% Management 45% 71% Non-management 30% 58% Satisfaction with organization Looking to leave MERCER

39 PUBLIC SECTOR EMPLOYEES MORE ENGAGED My work gives me a feeling of personal accomplishment 57% 65% I am proud to work for my organization I feel a strong sense of commitment to my organization I would recommend my organization to others as a good place to work 59% 62% 52% 58% 52% 56% At the present time, I am seriously considering leaving my organization 30% 40% Private Public MERCER

40 GENERATION GAP: YOUNG EMPLOYEES HAVE MIXED VIEWS OF WORK In Canada, 44% under age 35 are considering leaving Employees age 34 and under are more positive about most aspects of work, but: More likely to be seriously considering leaving their job Employees 50 and older are much less positive about work, less likely to leave MERCER

41 BASE PAY RANKS MOST IMPORTANT SATISFACTION IS LOW COMPARED TO OTHER ELEMENTS MOST VALUED ELEMENTS OF THE VALUE PROPOSITION (OUT OF 13) Base pay/hourly wage Retirement savings/pension plan 1 Health care coverage 2 Paid time off/vacation schedule Flexible schedule 54% 69% 70% 66% 57% AND EMPLOYEE SATISFACTION WITH EACH ELEMENT 1. Employee has retirement benefits 2. Employees enrolled in employer sponsored health plan MERCER

42 RETIREMENT READINESS: BENEFITS VALUED,BUT READINESS IN DOUBT In Canada, 7 out of 10 are satisfied with their retirement plan Perfect storm of factors is creating insecurity and increasing importance of retirement benefits DB plan cuts/freezes/terminations, primarily in private sector organizations Retirement readiness decreases substantially with age Younger workers losing confidence in future support from government-provided plans MERCER

43 BENEFITS DILEMMA: IMPORTANCE AND SATISFACTION GROW AMID ANXIETY OF COST In Canada, 3 out of 4 are satisfied with their benefits Satisfaction is high with all benefits, especially medical coverage (76% satisfied) and retirement plans (69% satisfied) However, rising health care cost is a concern for all employees Fewer expect health care to be affordable in five years 28% were asked to pay more out of pocket for health benefits last year; 15% saw their health benefits scaled back MERCER

44 MATCHING PAY AND PERFORMANCE In Canada, about 1 out of 3 say their organization does an adequate job of matching pay to performance Disconnect exists between pay and performance Employers providing less support in careers and not retaining the best, say employees Scores in most categories trend lower since 2011 Upbeat assessments on diversity, dignity, and respect MERCER

45 PAY AND PERFORMANCE I am paid fairly given my performance and contributions to my organization 2011 My organization does an adequate job of matching TODAY pay to performance 57% 51% 46% 39% I have clearly defined performance goals and objectives 60% 69% When I do a good job, my performance is rewarded 35% 39% 2011 Today Inside Employees Minds Canada, 2011 and Private sector employees for trending purposes MERCER

46 WHAT S NEXT STAY TUNED MERCER

47 KEY TAKEAWAYS MAJORITY OF CANADIAN ORGANIZATIONS ARE BEING MORE CAUTIOUS WITH THEIR BUDGETS IN 2015 AND 2016 COMPARED TO PREVIOUS YEARS OVERALL ECONOMIC CLIMATE IS THE MOST COMMON FACTOR INFLUENCING DECISION-MAKERS COMPENSATION DECISIONS FOR 2016 HAPPY DOES NOT MEAN STAYING ARTICULATE A VALUE PROPOSITION THAT SPEAKS TO ALL DEMOGRAPHICS AND EVOLVES OVER TIME ORGANIZATIONS NEED TO UNDERSTAND THE ENGAGEMENT DRIVERS FOR THEIR WORKFORCE IN ORDER TO MOTIVATE AND RETAIN TALENT MERCER

48 QUESTIONS FROM THE AUDIENCE MERCER

49 MERCER