Southern Nevada Compensation & Benefits Association What’s New in Compensation and Benefits
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Transcript of Southern Nevada Compensation & Benefits Association What’s New in Compensation and Benefits
www.mercer.com
Southern Nevada Compensation & Benefits Association
What’s New in Compensation and Benefits
May 14, 2008
Patrick Shannon Nicole Jones-Gyllstrom
2© 2008 Mercer LLC. All rights reserved.
Topics
How is today’s economy impacting you?
What’s new in compensation?
What’s new in benefits?
Questions and Discussion
3© 2008 Mercer LLC. All rights reserved.
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.
4© 2008 Mercer LLC. All rights reserved.
How is the economy impacting you?Recent survey trends
60%
6%
34%
No changeExpandingMay freeze or downsize
Are you instituting staffing level changes?
Source: Mercer Snapshot Survey, 400 responses, March 2008.
Did you consider or institute budget changes in 2008?
85%
10%5%
No changeConsidering reductionHave reduced
5© 2008 Mercer LLC. All rights reserved.
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.
What’s new in compensation?
6
7© 2008 Mercer LLC. All rights reserved.
What’s new in compensation?
Continuing emphasis on total rewards
Strengthening of pay-for-performance
Increasing use of workforce segmentation
8© 2008 Mercer LLC. All rights reserved.
Rewards represent a downstream tool…Mercer’s Workforce Strategy Model
9© 2008 Mercer LLC. All rights reserved.
Three perspectives on total rewards…and costs are growing
Multiple perspectives are driving change
Rewards costs as a percentage of revenue are escalating
10© 2008 Mercer LLC. All rights reserved.
What total rewards levers do you have to pull?
Compensation
Base pay Guaranteed “bonuses” Short-term incentives Long-term incentives Financial allowances Financial recognition programs Deferred compensation
Development & Career
Performance management Learning and development Career opportunity and pathing Tuition reimbursement Mobility opportunities
Benefits
Retirement Savings and other wealth creation
programs Medical / Dental / Vision /
Prescription Drug, etc. Life insurance Short and long-term disability Accident coverage Job-related perquisites
Work Lifestyle
Time off Wellness programs Dependent care Workplace flexibility Commuter programs Workplace facilities and perquisites Experiential rewards Non-financial and status
recognition
You Are What You Reward
11© 2008 Mercer LLC. All rights reserved.
What rewards levers are other companies pulling?Areas for rewards investments over next 12 months
% of firms
Source: 2007 Mercer Total Rewards Snapshot survey of 583 firms across the US and Canada.
12© 2008 Mercer LLC. All rights reserved.
Some goals span groups: predictable income/benefits, having meaningful roles, opportunities for growth, being treated with dignity, and respect.
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)
Saving for a home
Balancing work and family/personal life
Flexible work hours
Career advancement opportunities
Saving for a child’s education
Planning for retirement
Saving for a child’s education
Planning for retirement
Dealing with the stress of balancing work and family/personal life
Taking care of an older parent
Planning for retirement/retiring
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
18-29
30-39
40-54
55+
Different goals by age group
Source: Mercer interviews
What rewards levers should you pull for what groups?One size does not fit all
13© 2008 Mercer LLC. All rights reserved.
What rewards levers should you pull for what groups?Workforce segmentation based on relative value creation
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
Challenge:
14© 2008 Mercer LLC. All rights reserved.
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)
How are other organizations segmenting their workforce?
What’s new in benefits?
15
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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
17© 2008 Mercer LLC. All rights reserved.
Cost growth has been flat since 2005Total health benefit cost change vs. workers’ earnings and general CPI
-1.1%
5.7%*
18.6%
16.7%
17.1%
12.1%
10.1%
8.0%
2.1% 2.5%
0.2%
6.1%
7.3%
11.2%
8.1%
14.7%
10.1%
7.5%
6.1% 6.1% 6.1%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Workers' earningsAnnual change in total health benefit cost per employee
Overall inflation
* ProjectedSource: 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.
18© 2008 Mercer LLC. All rights reserved.
Employee cost-shifting continues in 2007 among large employersPPO – average in-network deductibles
$473$426$413
$366$277 $291 $302
$343
$995$882
$833$765
$703$689
$1,022$1,134
2000 2001 2002 2003 2004 2005 2006 2007
IndividualFamily
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Employee cost-shifting continues in 2007 among large employersHMO – average copay for physician visits
$17
$16
$15
$14
$12
$11$10
$16
2000 2001 2002 2003 2004 2005 2006 2007
20© 2008 Mercer LLC. All rights reserved.
Majority of employers planned to shift cost in 2008Large employers
40%36% 39%
Will raise employeecontribution percentage
Will raise deductibles,copays, or other cost-
sharing features
Will not shift cost
21© 2008 Mercer LLC. All rights reserved.
Slowdown in underlying trend suggests utilization may be fallingIncrease in cost predicted for upcoming plan year
10.0% 9.8%
9.0%
7.9%
6.6% 6.7%6.1%
5.7%
2005 2006 2007 2008
Before changes*
After changes*
* Includes changes in carrier, contribution strategy or plan design.
22© 2008 Mercer LLC. All rights reserved.
Employer cost management activities helping to slow increasesLarge employers
* in efforts to control health benefit cost or improve workforce health and productivity
52%
80% 20%
48%Consumerism
Healthmanagement
Source: Mercer’s National Survey of Employer-Sponsored Health Plans
Use strategy
Don’t use strategy
Use strategy and believe it has been successful*
23© 2008 Mercer LLC. All rights reserved.
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%
Use of specific health management programsLarge employers
24© 2008 Mercer LLC. All rights reserved.
Type of health information providedLarge employers
Tool to help select most appropriate plan
Information on health conditions
Individual provider quality
Individual provider cost
61%
30%
22%
21%
25© 2008 Mercer LLC. All rights reserved.
Increased somewhat
49%
Stayed about the same
21%
Decreased1%
Don't know20%
Increased significantly
9%
Employers see increased utilization of health informationAmong employers that provide health information
26© 2008 Mercer LLC. All rights reserved.
Strongly positive8%
Evenly mixed between positive
and negative32%
More negative than positive/Strongly
negative7%
More positive than negative
53%
Employee reaction to HSA-based CDHPLarge HSA sponsors characterize the response of employees enrolled in the plan
27© 2008 Mercer LLC. All rights reserved.
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
Coverage for part-time employeesLarge employers with at least some PTEs
28© 2008 Mercer LLC. All rights reserved.
Same-sex domestic partner coverage on the rise, but strong regional variations persistLarge employers
29%
51%
20%
39%
16%
34%
62%
17%
51%
18%
All largeemployers
West Midwest Northeast South
20062007
29© 2008 Mercer LLC. All rights reserved.
Bariatric surgery coverage declined in 2007Large employers
49%
24%26%
54%
18%
28%
Covered, but membermust comply with
behavior modificationprogram/standards
Covered the same as anymedically necessary
procedure
Not covered
2006 2007
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Chiropractic 85% 91%
Acupuncture/acupressure 33% 46%
Massage therapy 19% 15%
Homeopathy 12% 3%
Biofeedback 9% 9%
None 13% 8%
Alternative medicine therapies covered Offered to employees enrolled in primary medical plan
Jumbo employers
Large employers
31© 2008 Mercer LLC. All rights reserved.
Use of salary-based employee cost-sharing, by employer size
8%
13%
17%
22%
25%
500-999employees
1,000-4,999 5,000-9,999 10,000-19,999 20,000 or more
32© 2008 Mercer LLC. All rights reserved.
Clinic for occupational health services 31% 8%
Clinic for primary care services 14% 10%
Considering for 2008 or 2009
Currently provide
Provide onsite or near-site medical clinicsLarge employers
33© 2008 Mercer LLC. All rights reserved.
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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Plan Types:
Voluntary
Employer funded base with voluntary buy-ups
Executive carve-out (employer funded)
Long Term Care Offerings Continue to Grow
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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
36© 2008 Mercer LLC. All rights reserved.
Total Rewards StrategyTying 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
37© 2008 Mercer LLC. All rights reserved.
#1 Attraction and Retention Tool for EmployeesAfter health plan offerings
Work life balance!
38© 2008 Mercer LLC. All rights reserved.
Questions and Discussion
Patrick Shannon, PhD
Nicole Jones-Gyllstrom
Thank you!
www.mercer.com