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Karen Choi

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Massachusetts Employers Plan Smaller Pay Hikes than Rest of Nation

Posted by Karen Choi on Jan 12, 2012 8:54:00 AM

Massachusetts may be outperforming the rest of the country economically, but Bay State employers appear unconvinced that the time is right for significant salary increases.

Human ResourcesThe annual AIM Human Resource Practices Report released this morning indicates that companies throughout the commonwealth are planning smaller salary increases for 2012 than their counterparts around the nation. Massachusetts employers predict salary increase budgets in the 2.53 percent to 2.8 percent range, while a recent Culpepper survey revealed salary budgets across the U.S. are projected to increase 2.92 percent to 3.01 percent.

The cautious approach to compensation comes despite the fact that more than two-thirds of the 368 participants in the AIM 2011 HR Practices Survey report business conditions as good to excellent. Twenty-seven percent report fair conditions and 5 percent report business as poor in a state where the unemployment rate of 7 percent remains well below the national jobless rate.

Two-thirds of employers who participated in the survey plan to increase salary ranges in 2012, with an average increase of 2.8 percent. An indication that caution remains the watchword is the fact that one in four companies plans to reduce, freeze, or delay salary increases this year. Only one percent of companies plan to eliminate the 2012 salary increase. These numbers are virtually unchanged from 2011.

“Companies are trying to create human resource strategies that make them the employer of choice in a hiring market that is substantially more competitive than it has been over the past several years, while at the same time dealing with an economy that continues to put financial pressure on the business community,” said Sandy Reynolds, Executive Vice President of the Employers’ Resource Group at AIM.

“The sluggish recovery coupled with spiraling health-care costs have squeezed the resources companies have available."

The Human Resource Practices Report analyzes data from 368 Massachusetts employers spread almost evenly throughout the commonwealth.  Forty-seven percent of participants were manufacturers, with the majority having fewer than 250 employees.

A few highlights from the report:

  • In 2011, 75 percent of companies paid incentives at or above target to their executive and exempt level staff, compared to 60 percent in 2010.
  • Employers looking to control the escalating cost of health insurance are evaluating the types of health plans offered to employees, and the cost-share arrangements of those plans. A small number of companies have moved to Tiered Network Health plans and Limited Network Health plans.
  • Employers use a mix of techniques to source qualified candidates, with the use of technology taking center stage. One out of every two job openings is advertised online.
  • Employers have apparently embraced work-schedule flexibility.

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Topics: Compensation, Massachusetts employers, Human Resources

T Leave Scandal Provides Cautionary Tale on Paid Sick Days

Posted by Karen Choi on Aug 24, 2011 10:50:00 AM

A recent investigation by the MBTA that found massive abuse of the federal Family and Medical Leave Act (FMLA) by T bus drivers provides a cautionary tale to state lawmakers as they debate mandated paid sick days.

Paid Sick DaysThe MBTA report found that the agency paid $2 million during past fiscal year in overtime costs to cover absent bus drivers taking fraudulent FMLA leave, referred to among employees as the “Friday-Monday Leave Act.”  The report indicated that 1,600 bus drivers took a total average of 18,125 days each year during the five-year period between 2006-2010 using the FMLA benefit after the agency cracked down on suspected abuse of sick days.

Drivers averaged more than 11,000 paid sick days each year in addition to the FMLA leave.  In recent months more than a dozen MBTA employees have been fired for submitting fraudulent notes or falsifying medical documents and forging signatures on stolen medical forms.

The $2 million FMLA tab was up $250,000 from the previous fiscal year.

Sick leave provides a level of income protection to employees in the event of accident or illness.  The majority of employers who offer sick leave provide this benefit to employees on a non-vested basis, meaning the paid leave is available to the employee if needed, but is not paid out at termination or rolled over from one year to the next.

A smaller percentage of companies allow employees to roll over some portion of unused sick leave from one year to the next; or allow employees to cash out a percent of unused sick leave annually.  Some companies may even offer significant flexibility, while not having a formally defined sick leave policy.

While employers struggle to make payroll, address skyrocketing health-care premiums and remain competitive during this jobless summer, labor unions and other advocates continue to push a mandated paid-leave proposal that would remove employer flexibility and choice under the guise that it is “good for business.”  Mandated paid sick leave introduces a host of  issues for employers throughout Massachusetts:

  • At companies that already offer paid sick leave, the benefit will change from being a safety net to an entitlement, one that carries forward from one year to the next.
  • Companies will likely experience an increase in the number of unplanned absences.  Employees using sick leave for non-sick related absences strain companies by impacting production and increasing costs related to overtime needed to backfill unplanned absences.  When an employee takes vacation or personal time, they schedule the absence in advance, allowing the company to staff to cover the absence.  Because sick leave is most often an unplanned absence, companies are left scrambling to cover the absence.
  • Companies looking to control abuse will become the “sick leave police” developing practices to monitor sick leave usage, including requiring doctors notes and monitoring Friday/Monday absences
  • Employers who have migrated to Paid Time Off banks will need to address what portion of their PTO program is identified as sick leave.  PTO programs may need to be modified to comply with the mandate.
  • Small employers would feel the impact most directly because they are more likely than large enterprises to not offer paid sick leave, or to offer limited sick leave or flexibility.
  • Employees may see attendance bonus programs disappear because providing the bonus and allowing unused sick time rollover from one year to the next results in double payment.

Employers have a finite amount of money available for total compensation, including base pay, incentives, insurances, payroll taxes, time off and a host of other benefits.  The budget is the budget.  So if Massachusetts mandates seven paid sick days, employees may be faced with cutbacks in other areas to fund this new mandate.  Whether the impact is in jobs, merit budgets, insurance premiums and co-payments or staff training and development opportunities – rest assured there is a shared cost to both the employer and employee.

Bottom line, this case shows that MBTA customers and Massachusetts taxpayers are left with a hefty bill for a debt-ridden agency. They are also left with a stark example of the way in which this type of policy changes employee perception of sick leave from using it to cover absences related to illness or injury to using it for personal time or pleasure. 

So how would your company react if Massachusetts mandated seven paid sick days?

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Topics: Family and Medical Leave Act, Paid Sick Days, Mandated Paid Sick Days

Resumption of Hiring Prompts Employers to Sharpen Compensation Plans

Posted by Karen Choi on May 26, 2011 10:49:00 AM

Economists tell us that 2011 will be the year the recovery gathers momentum and the pace of job creation accelerates.  These analysts maintain that employers will increasingly have to think about hiring and also about retention, as current employees see more job options.

AIM Wage SurveyThe 2011 Associated Industries of Massachusetts General Wage and Executive Compensation survey reports published today reflect both optimism and caution among Massachusetts employers about the direction of the economic recovery:

  • Merit budgets continue to climb. Employers expect to raise salaries by an average of 2.4 percent during 2011, compared to 2.1 percent in 2010.
  • Companies planning pay freezes dropped from 35 percent of survey respondents in 2010 to 17 percent in 2011.
  • Seventy percent of survey participants are replacing open positions and critical hires. Another 25 percent report normal recruitment activity.  Only 1 percent of companies report a hiring freeze for 2011.
  • Steady resumption of bonus activity, elimination of reduced work hours and furloughs, and reductions of involuntary turnover.

The 212 AIM member employers who participated in the survey paint a picture consistent with recent economic numbers. The 7.8 percent Massachusetts unemployment rate in April, for example, compares favorably to the peak rate of 8.8 percent in October 2099 and the current national unemployment rate of 9 percent.

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And the addition of 19,500 jobs to the Massachusetts economy during April is more significant than the minimal change in the unemployment rate.  Job growth in the manufacturing, education and health services, hospitality and manufacturing point to measured confidence among employers.  Buoyed by strengthened corporate profits and balance sheets, employers now appear poised to resume hiring and restore competitive compensation practices.

But these employers are moving forward cautiously. They realize that Massachusetts has recovered only one-third of the nearly 143,000 jobs that were lost during the last recession, and there are still more than 272,000 residents without a job.

Companies continue to expect turbulent economic news and conduct business with the expectation that we are in a prolonged recovery.

Topics: AIM General Wage Survey, AIM Executive Compensation Survey

Massachusetts Employers See Shift in Job Market

Posted by Karen Choi on Dec 20, 2010 8:56:00 AM

HR PracticesThe ground is firming underneath the economic recovery.

The 2011 Associated Industries of Massachusetts HR Practices Report released today finds that Massachusetts employers believe the job market is shifting, even though unemployment remains high at 8.2 percent. Employers are reversing two years of salary freezes, furloughs and benefit reductions in an effort to attract and retain key employees in an increasingly competitive hiring environment.

The evidence:

  • Employers budgeted average wage and salary increases of 1.7 percent for 2009 and paid actual increases of 1 percent;
  • The 2010 AIM Annual Wage Report found that employers expected to raise salaries and wages 2.1 percent this year and paid actual increases of 2.5 percent.
  • Employers are now budgeting increases of 2.45 percent for 2011. Exclude those companies planning to freeze wages and the projected increase totals between 2.6 and 3 percent.
  • Sixty-one percent of employers report current business conditions are good to excellent.

And fewer companies are keeping wages level or reducing them to shore up the bottom line. The percentage of companies planning compensation freezes for 2011 dropped to 11 percent from the 24 percent who anticipated freezes for 2010, while the share of companies expecting to reduce pay declined from 10 percent to 6 percent.

The results paint a picture of employers growing confident in the economy and taking steps to ensure that their compensation plans remain competitive as the two-year-old buyer’s market for talent begins to shift.  The stakes are high for employers - job seekers who have spent the past 24 months trying to scratch out a single employment offer increasingly report having the choice between two or more offers from companies seeking to build market share during the recovery.

Companies are also stepping up training and aggressively using electronic recruiting to gain an edge in maintaining and hiring key workers. More than half of all recruitment now takes place online, with companies moving beyond large job portals such as Monster.com and CareerBuilder.com and into social media environments such as Facebook and LinkedIn.

Topics: Compensation, Associated Industries of Massachusetts, AIM, Economy, Human Resources

Massachusetts Employers Resume Hiring as Economy Improves

Posted by Karen Choi on Jun 15, 2010 10:47:00 AM

The 2010 Associated Industries of Massachusetts General Wage Report confirms that the Massachusetts economy has started to grow again and that compensation has re-emerged as a business priority.

After multi-year salary freezes, companies are assessing the competitiveness of their compensation programs to ensure retention of critical talent and the ability to recruit the people needed to meet business opportunities.

The most important result of the survey is that employers are hiring again. More than half of survey participants are filling open positions, while only 3.5 percent report a hiring freeze. Few companies are freezing salaries, delaying salary increases or cutting compensation in 2010.

Other positive signs include the restoration of overtime hours, second and third shift operations and internal promotions. Half of the employers who previously implemented furlough programs, reduced or eliminated bonus programs, or cut work hours during 2009 have restored operations to former levels.

The survey finds that Massachusetts employers plan to grant average merit pay increases of 2.1 percent for 2010. The actual pool varies significantly by company - 40 percent of employers report a merit pool budget of 3 percent, 27 percent have established no merit pool and a handful of companies are taking a more aggressive stand and have budgeted anywhere from 3.5 to 5 percent.

The bullish approach to compensation reflects steadily growing confidence in the economy during the past year among Massachusetts employers. The AIM Business Confidence Index surged into position territory for the first time in two years during May and has risen in 13 of 15 months since hitting an all-time low in February 2009.

Good news indeed for a Massachusetts economy still running at 9.3 percent
unemployment during the early and sometimes uncertain phases of
a recovery.

One thing is clear. The picture is very different from one year ago.

Topics: Compensation, Associated Industries of Massachusetts, AIM, Massachusetts economy, Massachusetts employers, Labor

Employers Walk Benefits Tightrope During Economic Downturn

Posted by Karen Choi on Mar 16, 2010 10:36:00 AM

Massachusetts employers spent 2009 walking a tightrope between the need to control benefit costs amid a recession and the need to maintain a competitive benefit structure to retain key people. Get ready for a similar high-wire act in 2010.

AIM's newly published 2010 Benefits Survey Report finds that the global economic downturn dominated benefits practice during 2009. Ten percent unemployment, declining sales, and the increased cost of doing business pushed companies to their limits.  Employers responded by freezing salaries, instituting furloughs to reduce labor costs and looking hard at employee benefit programs to find ways to carve out cost. 

There is little dispute that the cost of employee benefits cuts into the bottom line.  The good news is that despite the poor economy, employers recognize the importance of competitive benefits as an integral part of overall employee compensation.

Experts say that while the economy is healthier than it was a year ago, it still faces an uncertain journey toward recovery during 2010. The economy has resumed growing, but a turnaround in the employment market remains months away and the jobless rate is expected to remain near double digits.

"We've been stabilized, and moved from intensive care to the recovery floor of the hospital, but we're still in the hospital," says Raymond Torto, Global Chief Economist for CB Richard Ellis Group.

The sluggish recovery will keep the pressure on employers to maintain employee benefits in the face of strained earnings, flat investment results and the rising cost of health insurance. Ninety-five percent of companies cite controlling health insurance costs as their benefit priority for 2010, and many expect to continue shifting premium and deductible costs onto employees as national health reform lurches forward in Washington, D.C.

At the same time, employers know that too many reductions in benefits may leave them vulnerable when the recovery accelerates late in the year. Welcome to the tightrope.

Topics: Compensation, Associated Industries of Massachusetts, AIM, Massachusetts employers, Human Resources, Benefits

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