MERCER S 2016 COMPENSATION PLANNING SEMINAR

Transcription

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

2 TODAY S PRESENTERS HELMUT PASTRICK AILSA FORSGREN GRAHAM DODD MERCER

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

4 Economic Outlook Mercer 2016 Compensation Planning Seminar Vancouver September 15, 2015 Helmut Pastrick Chief Economist Central 1 Credit Union

5 Substantial slowdown in emerging markets since 2011 Economic Growth: World, Emerging and Advanced Economies Per cent change in real GDP Emerging World Advanced Source: IMF WEO Apr Economics

6 Disinflation is a dominant theme CPI Inflation: World, Emerging and Advanced Economies Per cent change Emerging World Advanced Source: IMF WEO Apr Economics

7 Cyclical pattern; deflation last three years Commodity Price Inflation: World Per cent change Oil Total Metals Source: IMF WEO Apr Economics

8 China s slowing growth during economic transition Economic Growth: China Per cent change at annual rate in real GDP Annual Quarterly Q1-12 Q1-13 Q1-14 Q1-15 Source: OECD. Latest: Q Economics

9 Renewed plunge in oil price West Texas Intermediate Oil Price USD/barrel Source: U.S. Federal Reserve. Latest: 8/28/2015 Economics

10 Substantial imbalance in 2015, less oversupply in 2016 World Oil Production and Consumption Balance Million barrels/day Million barrels/day Balance (RHS) Production Consumption Q1-12 Q1-13 Q1-14 Q1-15 Q Source: U.S. EIA, Short-term Energy Outlook, August Economics

11 Modest price expectations WTI Oil Price: Actual and Futures US$ per barrel Actual Futures Q1-12 Q1-13 Q1-14 Q1-15 Q1-16 Q1-17 Source: U.S. EIA, NYMEX. Futures as of Sept. 4, Economics

12 Mixed external economic outlook Global Economic Forecasts Indicator Global real GDP, % chg U.S. real GDP, % chg China real GDP, % chg Japan real GDP, % chg S. Korea, real GDP, % chg EU real GDP, % chg Source: IMF, Consensus Forecasts. Economics

13 Two negative quarters; recession in Canada? Economic Growth: Canada Per cent change at annual rate Real Final Domestic Demand Real GDP -2-4 Q1-11 Q1-12 Q1-13 Q1-14 Q1-15 Source: Statistics Canada. Latest: Q Economics

14 Recession criteria: The National Bureau of Economic Research in the U.S. defines a recession as a significant decline in activity spread across the economy, lasting more than a few months Three conditions need to be met: duration, depth, and breadth. Economics

15 Sharp plunge in investment spending Change in Real Spending Q to Q2-2015: Canada Expenditure Consumption Residential Government Business investment Exports Imports GDP Per cent Source: Statistics Canada, Central 1 Credit Union. Economics

16 June s increase ends five monthly contractions Monthly Change in Industry GDP: Canada Per cent Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Source: Statistics Canada, Central 1 Credit Union. Latest : Jun-15 Economics

17 Oil and gas down, rest of economy growing Industry GDP: Canada Jan. 2014= GDP ex. Oil & Gas Oil & Gas Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Source: Statistics Canada, Central 1 Credit Union. Latest : Jun-15 Economics

18 Oil sands output rising; support sector hardest hit Oil and Gas Industry GDP: Canada Jan. 2014= Non-conventional Conventional Support activities Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Source: Statistics Canada, Central 1 Credit Union. Latest : Jun-15 Economics

19 Plunge in engineering reflects oil/gas cap-ex cutbacks Construction Industry GDP by Type: Canada Jan. 2014= Nonresidential Residential Repair Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Source: Statistics Canada, Central 1 Credit Union. Latest : Jun-15 Economics

20 Employment still rising Employment: Canada Persons - millions Persons - thousands Change (rhs) Employment 17.7 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul Source: Statistics Canada, Central 1 Credit Union. Latest : Aug-15 Economics

21 Sharp rise in Alberta s EI counts Employment Insurance Beneficiaries: Canada Jan. 2014= Alberta Saskatchewan British Columbia Rest of Canada 80 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Source: Statistics Canada, Central 1 Credit Union. Latest : Jun-15 Economics

22 Recession in Canada? Of the three criteria only duration is potentially significant Depth is 0.3% and insignificant Breadth or pervasiveness is mostly limited to oil and gas support, business investment, engineering construction, and energy related manufacturing; other sectors are growing or holding up Geographically, Alberta and Saskatchewan experiencing most of downturn On evidence to date, no recession; new data will confirm or reject Economics

23 Modest improvement in 2016 Economic Forecasts: Canada Indicator Nominal GDP, % change Real GDP, % change Employment, % change Unemployment rate, % mo. T-bill rate, % y GoC bond, % U.S.- Canada FX, cents Source: Statistics Canada, CREA, Central 1 Credit Union. Note: Annual averages.

24 Unemployment rate rising Employment: Saskatchewan Persons - thousands Unemployment Rate: Saskatchewan Per cent of labour force Jan-13 Jan-14 Jan Jan-13 Jan-14 Jan-15 Source: Statistics Canada. Note: Seasonally adjusted. Latest: Aug-15 Economics

25 Labour market deteriorating Employment: Alberta Persons - millions Unemployment Rate: Alberta Per cent of labour force Jan-13 Jan-14 Jan Jan-13 Jan-14 Jan-15 Source: Statistics Canada. Note: Seasonally adjusted. Latest: Aug-15 Economics

26 Ongoing improvement Employment: B.C. Persons - millions 2.32 Unemployment Rate: B.C. Per cent of labour force Jan-13 Jan-14 Jan Jan-13 Jan-14 Jan-15 Source: Statistics Canada. Note: Seasonally adjusted. Latest: Aug-15 Economics

27 Metro Vancouver growing; rest of B.C. languishes Employment Trends Vancouver CMA and Rest of B.C. 1996= Vancouver CMA Rest of B.C Source: Statistics Canada, Central 1 Credit Union. Note: 2015 is year-to-date August. Economics

28 Alberta s 2015 gain not sustainable Average Hourly Earnings: B.C., Alberta, and Saskatchewan Per cent change Alberta Sask. B.C Source: Statistics Canada. Note: Fixed weighted index is average to June. Economics

29 Lower inflation rate in 2015 CPI Inflation Rate: B.C., Alberta, and Saskatchewan Per cent Alberta Sask. B.C Source: Statistics Canada. Note: 2015 is average to July. Economics

30 Labour Market Forecasts Indicator Alberta Unemployment Rate, % Alberta CPI Inflation Rate, % Alberta Avg. Hourly Earnings, % B.C. Unemployment Rate, % B.C. CPI Inflation Rate, % B.C. Avg. Hourly Earnings, % Sask. Unemployment Rate, % Sask. CPI Inflation Rate, % Sask. Avg. Hourly Earnings, % Source: Statistics Canada, Central 1 Credit Union. Economics

31 Thank you

32 HIGHLIGHTS FROM THE SURVEY MERCER MERCER

33 MERCER RESEARCH MERCER

34 PARTICIPANT PROFILE 590 PARTICIPANTS Financial Services % 7 % 5 Insurance % 8 High Tech % 6 Consumer Goods % 9 Other Non Manufacturing 18 % Services (Non- Financial) 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%) 16 % Energy MERCER

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

36 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

37 EMPLOYERS REMAIN CAUTIOUS SALARY BUDGETS REMAIN STEADY GREATER VANCOUVER (ALL INDUSTRIES, ALL LOCATIONS, EXCLUDING ZEROS) YEAR ALL EMPLOYEES EXEC MGMT PROFESSIONAL CLERICAL OPERATIONAL (ACTUAL) (ACTUAL) (ACTUAL) (ACTUAL) MERCER

38 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

39 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

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

41 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

42 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

43 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

44 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

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

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

47 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

48 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

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

50 INSIDE EMPLOYEES MINDS MERCER MERCER

51 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

52 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 low-cost health care MERCER

53 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% 1. Private sector employees only for trending purposes Inside Employees Minds Canada, 2011 and 2015 MERCER

54 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

55 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

56 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

57 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

58 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

59 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

60 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

61 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

62 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

63 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

64 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

65 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

66 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

67 DIVERSITY EFFORTS PAYING OFF My organization actively supports diversity in the workplace 63% 68% Employees in my organization are treated with dignity and respect, regardless of their position or background 62% 62% 2011 Today Inside Employees Minds Canada, 2011 and Private sector employees for trending purposes MERCER

68 WHAT S NEXT STAY TUNED MERCER

69 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

70 QUESTIONS FROM THE AUDIENCE Ailsa Forsgren Partner Western Canada Talent Leader Graham Dodd Partner North American Regional Practice Leader, Talent Strategies MERCER

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