HR Practices Report Introduction

Transcription

1 Associated Industries of Massachusetts HR Practices Report Introduction Massachusetts employers plan to increase wages and salaries by an average of 2.96 percent during 2014 as pay raises finally surpass the levels that were in place prior to the Great Recession. The projected raises for next year continue a trend that has seen salary growth climb from a low of 1.7 percent in 2009 to 2.1 percent in 2010, 2.4 percent in 2011, 2.55 percent in 2012 and 2.8 percent this year. The prospect of employers offering fatter pay envelopes to recruit and retain talent next year comes despite the fact that the Massachusetts unemployment rate rose from 6.4 to 7.1 percent between April and November. Massachusetts employers appear to be on the same compensation page as their colleagues around the United States. National surveys from World at Work, Mercer and Hay forecast 2014 salary increases of 3 percent across industry sectors, while the Economic Research Institute forecasts a 2.9 percent increase. But Bay State employers also face a wild card in their compensation calculations for next year the prospect that the Massachusetts Legislature will increase the commonwealth s $8 per hour minimum wage. The state Senate last month passed a bill that would boost the base wage to $9 per hour in 2014; $10 per hour in 2015; and $11 per hour in 2016 and thereafter index it to inflation. The House of Representatives is expected to take up the issue in January, potentially in tandem with an overhaul of the Unemployment Insurance system. The issue for employers is not simply increasing hourly pay to meet the new minimum wage. A $3 per hour increase over three years will require employers to plan for dealing with wage compression issues when inexperienced and new employees are brought up to pay rates currently given to experienced workers. Companies with salary ranges will also need to adjust them annually between 2014 and Salary ranges are developed by setting range widths (difference between minimum and maximum) and relationships between range midpoints. The result will be an overall increase in compensation spending. The bottom line: employers need to review their wage structures to determine budgetary impact and assess their internal compensation expertise to carry out a multi-year compensation plan responsive to the potential changes in the minimum wage.

2 HR Practices Report Health Insurance Costs The other major compensation challenge facing Massachusetts employers remains the cost of providing health insurance to workers. Companies continue to rely heavily on cost shifting to control health premiums, but an increasing number of employers are moving gingerly into the world of plan-design options ranging from high-deductible health plans to tiered health programs in which workers pay smaller premium amounts to be treated at a high-quality, moderate-cost health facilities. Nearly one-half of employers have integrated a cost-containment plan into their plan offerings. Only seventeen percent of those employers have moved to offering high deductible, tiered and limited network plans exclusively. Employers who have reviewed quotes for their 2014 health insurance are looking at average premium increases across all plans of 4.65 percent. Health costs are being moderated, in part, by a 2012 Massachusetts law that ties the annual increase in total health care spending to the rate of the overall economic growth through The benchmark for health care spending increases in 2013/2014 is 3.6 percent. At the same time, employers are struggling to determine how implementation of federal health care reform will affect their health insurance bills. One provision of the Affordable Care Act limiting the factors that insurance companies use to price policies for employers with 50 or fewer workers could raise premiums for some employers by up to 57 percent. A second key ACA requirement requires employers with 50 or more workers to establish a measurement period during the year, to measure employee hours, and to determine whether they average 30 hours and are therefore eligible for full time health benefits. This fifth annual HR Practices Survey from Associated Industries of Massachusetts is intended to provide employers with timely information about compensation, health care, recruiting, and training and development. Watch for our biennial Benefits Survey Report to be published in February Our annual General Wage and Executive Compensation survey data collection period will kick off the first week of January and the report will be published in May of Please contact Kyle Pardo at KPardo@aimnet.org if you would like to participate or to purchase any AIM survey. 2

3 Associated Industries of Massachusetts Compensation Practices Projected wage and salary increases for 2014 will only be pennies higher than those in Salary increase budgets for next year range from 2.8 to 3 percent. After a six-year crawl out of economic uncertainty, salary budgets have finally surpassed those that were in place in AIM Salary Increase Trends 2008 to % % % % Massachusetts employers, after years of lagging national salary increases, plan salary increases equivalent to their counterparts across the nation. Massachusetts and National Salary Increase Trends 2008 to % % % 1.%0 0.5% Average Salary Increases Projected for 2014 Employee Classification # Companies Average Salary Increase (including Salary Freezes) # Companies Average Salary Increase (excluding Salary Freezes) Executive % % Exempt % % Non-exempt % Union % % 3

4 HR Practices Report 2014 Planned Average Salary Range Increases Employee Classification * Too few responses # Companies Average Salary Increase (including Salary Freezes) # Companies Average Salary Increase (excluding Salary Freezes) Broad Band 3 * * * Salary Ranges % % Step Increases 4 * * * Skill Rates % % 2014 Projected Salary Increases Correlated to Industry Sector % -.9% 1% - 1.9% 2% - 2.9% 3% - 3.9% 4% - 4.9% 5% - 5.9% More than 6% Non Manufacturing (111 companies) Manufacturing (107 companies) Key Findings The overall average projected 2014 salary increase budget is 2.96%. Non-manufacturing companies report an average of 3.06% while manufacturing companies report an average of 2.88%. Approximately 16% of non-manufacturing companies report projected increases of 4% or higher compared to 2013 when 1 of non-manufacturing companies projected increases of 4% or more. Only 8% of manufacturing companies report projected increases of 4% or higher compared to 2013, when 6% of companies projected increases of 4% or more. 4

5 Associated Industries of Massachusetts 2014 Projected Salary Increases Correlated to Business Conditions Salary Budget More than 6% 5% - 5.9% 4% - 4.9% 3% - 3.9% 2% - 2.9% 1% - 1.9%.1% -.9% Excellent (n=20) Good (n=100) Fair (n=31) Business Conditions * Of the 153 companies reporting both business conditions and projected salary increases, none reported business conditions as poor. Key Findings Companies rating business conditions as excellent trend higher on salary budgets than those that rate business conditions as good to fair. Percent of companies projecting an increase of 3% or higher: 84% of companies who rate business conditions as excellent 75% of companies who rate business conditions as good 54% of companies who rate business conditions as fair. If we look at companies projecting an increase of less than 3% correlated to reported business conditions we see: 16% of companies who rate business conditions as excellent 25% of companies who rate business conditions as good 45% of companies who rate business conditions as fair Only 3 companies identified business conditions as poor. This sample size was too small to include in the graph. 5

6 HR Practices Report Pay Philosophy by Employee Classification Executive (n=163) Exempt (n=191) Non-exempt (n=201) Union (n=21) Pay above market No specific philosophy Pay at market Union Contract Pay below market 2013 & 2014 Compensation Strategies Pay as Normal Reduce Freeze Delay Eliminate 2013 Salary Increases Salary Increases Bonus Payments Bonus Payments Promotional Increases Promotional Increases Key Findings There is an 8% increase in the number of companies planning to pay salary increases and bonuses as normal compared to 2013 There is a 5% increase in the number of companies planning to pay promotional increases as normal when compared to The number of companies planning freezes has decreased when compared to

7 Associated Industries of Massachusetts Salary Structures Used by Employee Classification Salary Structure Used Broadband Salary Ranges Step Increases Skill Rates 2 None Executive (n=163) Exempt (n=191) Non-exempt (n=201) Union (n=21) Employee Classifications Key Findings Broadbanding, a formerly popular compensation practice, has decreased in usage to a point where 5% or fewer companies use broadbands for executive, exempt and non-exempt employees. Salary ranges are most commonly used for exempt and non-exempt positions. More than half of companies report no formal salary structures for executive level positions; more than one-third of companies report no formal structure for exempt and non-exempt positions. Of those companies reporting the use of salary ranges, the average 2014 salary range increase is 2.25% 7

8 HR Practices Report Compensation Practices 2013 Bonus Payouts Performance Bonus (n=92) Safety Bonus (n=32) Profit Sharing (n=53) Stock (n=17) Paid Above Target Pay at Target Pay Below Target Not Paid Companies That Offer Incentive Compensation Plans 43% 57% Offer (n=121) Do not offer (n=89) 8

9 Associated Industries of Massachusetts Health Care Health Insurance AIM and its 5,000 member employers continued to address the health care cost crisis in Massachusetts during These efforts included: Reconciling federal health care reform with the 2006 Massachusetts health care reform law. AIM is fighting for a waiver from certain provisions of federal health care reform to avoid increases in health insurance premiums for small employers and to preserve the state s success in insuring 97 percent of residents. Supporting implementation of the Massachusetts health-cost control law, including benchmarking increases in medical spending to the overall growth of the state s economy. Leveraging the expertise of the AIM Health Care Cost and Policy Committee, the members of which represent a broad-range of employers and health-care industry experts. Providing comprehensive education for employers on the Affordable Care Act through Health Care Fridays Webinars and ACA Workshop programs. Providing an opportunity for Massachusetts employers to engage with state policy makers through Federal Health Care Reform education forums with the Massachusetts Health Connector; Partnering with A.I.M. Mutual Insurance Company, Best Doctors and Tufts Health Plans to offer employers with more than 50 employees access to health plan options usually reserved for much larger employers; and Offering multiple Webinars, blog articles and communications updating Massachusetts employers on developments in federal and state health care requirements. Recognizing that cost shifting and cost sharing alone will not solve the health care crisis, employers were asked what best describes the type of plan being offered in 2014: 54% will offer traditional health plans only (HMO, PPO, Indemnity). 17% will offer plans that drive cost containment only (High-Deductible, Tiered or limited Network), up from 13% for 2013, 29% will offer a combination of traditional and cost-containment plans. Nearly one-half of employers have integrated a cost-containment plan into their plan offerings, but only seventeen percent of those employers have moved to offering high deductible, tiered and limited network plans exclusively. Health Insurance Plans Offered Number of Companies HMO PPO HDHP with HRA or H.S.A HDHP Tiered Network 8 7 POS Indemnity Limited Network Currently Offer Plan to Offer in

10 HR Practices Report 2014 Average Health Insurance Premium Increase Health insurance premium renewals are spread throughout the year with spikes in January (29% of companies), April (1 of companies) and July (12% of companies). Of the 206 companies responding, 45 companies report receiving their 2014 premium increase. Keep in mind that many companies offer more than one plan choice. Actual 2013 increases are also reflected. The average reported 2014 premium increase across all plans is 4.65% Health Plan Type # of Companies Average Premium Increase # of Companies Average Actual Premium Increase PPO % % HMO % % POS % HDHP % HDHP with HSA % Tiered Network % Limited Network Number of Health Plans Offered (n=207) plan 2 plans 3 plans 4 plans 5 plans 6 plans Plan Renewal Month 3 25% 2 15% 1 5% Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec 10

11 Associated Industries of Massachusetts Health Care Contribution Strategy Same percentage contribution to all participation levels (n=132) Higher percentage contribution to employee only (individual) participation level than to family participation level Company contributions set for the lower cost plan, employees buy up and pay for the additional cost of more expensive plan(s) (n=22) (n=32) Same flat dollar contribution to all participation levels (n=6) Plan Design Changes Each year companies faced with higher health care costs grapple with balancing plan-design changes, costshifting strategies and how much additional cost the company is able to absorb. The percentage of companies either increasing or decreasing costs did not vary considerably from Plan Change HMO (n=135) PPO (n=91) POS (n=8) HDHP (n=28) HDHP w HSA (n=26) Tiered (n=11) Increasing Co-payments 18.5% 18.7% 37.5% 10.7% 9.4% 54.5% Deductibles 14.8% 20.9% 12.5% 25% 14.1% 72.7% Employee cost 19.3% 31.9% % 28.1% 45.5 Out-of-pocket 9.6% 16.5% 12.5% 7.1% 12.5% 45.5% In-network deductible 3.7% 9.9% 12.5% 0 1.6% 18.2% Decreasing Co-payments 1.5% % Deductibles 3% 0 25% 3.6% 0 0 Employee cost 3.7% 5.5% 12.5% 10.7% 3.1% 18.2% Out-of-pocket 2.2% % 0 In-network deductible.7% % Add this plan option 1.5% 2.2% 12.5% 25% 6.3% 9.1% *Indemnity and Limited Network plan changes are not displayed due to the small number of employers reporting data 11

12 HR Practices Report Beyond cost shifting through increased co-payments, deductibles and premiums, employers are developing strategies to better manager escalating health care costs. Planned Health Care Cost Savings Measures (Multiple answers allowed) Eliminate non-high deductible/non-tiered network plans from employee health plan choices (n=3) Implement HSA (health savings accounts) to offset high deductibles and coinsurance plans (n=22) Offer a new high deductible health plan option, tiered network, or limited network (n=37) We do not plan to participate in any cost containment strategies Implement wellness programs such as exercise programs, smoking cessation, and preventative screenings Educate employees on their ability to positively impact future premiums through consumer based health (n=49) Number of Companies (n=81) (n=91) Health Insurance Cost Containment Strategy Explore plan design changes to hold company health care costs to the lowest annual increase percent possible (n=150) Hold company health care costs to a targeted percent of payroll expense (n=26) Hold company health care cost to a targeted percent of projected earnings before interest, taxes, depreciation and allowance (n=6) Hold company health care cost to a targeted percent of projected revenue (n=4) Number of Companies 12

13 Associated Industries of Massachusetts Cost Management Plan Design Employers looking to manage health care costs have adopted plans designed to encourage the insured to choose high-quality, low-cost providers. These health plans include high-deductible health plans; high-deductible health plans with health spending accounts, tiered networks and limited network plans. A high-deductible health plan on its own or paired with a health savings account (HSA) or with a health reimbursement arrangement (HRA) is a consumer-driven health plan (CDHP). A tiered network is a plan in which employee cost-sharing is based on the tier in which the provider is assigned. The objective of the plan is to create an incentive for enrollees to seek care with low-cost, high-quality doctors and hospitals, while retaining the employee s ability to choose higher cost providers and facilities by assuming a greater share of the health care cost. A limited network is a plan in which employees can receive quality care in a specific lower-cost, community setting. High-deductible health plans have seen the largest year-over-year growth during the recent period. Tiered networks have seen a slow, measured adoption rate while few companies offer limited networks. 13

14 HR Practices Report Reason for Offering Consumer Health Plan 10 Reduce Employer Costs 8 Reduce Employee Costs Broker s Recommendation Incent Employees to Reduce Costs Employee Preferences Competitors Adopted Plan CDHP (n=92) Tiered (n-11) Union s Preference How Receptive are Employees to Plan Type % 28% 4 Not Receptive Indifferent 6 Receptive Very Receptive 4 49% CDHP (n=63) 2 Tiered (n=10) CDHP based on 63 responses of the total 92 companies offering a CDHP. Data for the Tiered Plans is based on 10 out of 11 companies offering Tiered plans. 14

15 Associated Industries of Massachusetts Making Health Care Decisions Companies were asked who had primary responsibility for health plan decisions. Respondents could select more than one answer. Primary Responsibility for Health Plan Decisions (n=194) HR Lead CEO/President Broker CFO or Controller Benefits Manager Other Office Manager Consultant How do employers provide benefits information to employees? Respondents could select more than one answer. Type of Benefits Education Provided to Employees (n=227) Benefits reference materials produced by the carrier Insurance carrier web site Open enrollment meetings Benefits reference materials produced by the broker Benefits reference materials produced by the employer Company-wide meetings Employee intranet Small group benefits open enrollment meetings On-site benefits fair

16 HR Practices Report The Affordable Care Act We asked companies to tell us about their progress complying with key elements of the Affordable Care Act. 106 companies responded. Employers were asked if they have determined whether their health plan meets the ACA affordability guidelines. Nearly three out of four companies have determined that their plans meets the guidelines; There is virtually no difference in results between manufacturing and non-manufacturing companies; Most of the remaining companies are currently reviewing their plan; and Only 4 percent of companies report not knowing what the affordability guidelines are. Meeting ACA Affordability Guidelines 23% 4% Plan Meets Affordability Guidelines 73% Reviewing Plan Don t Know Affordability Guidelines One of the key ACA requirements requires employers with 50 or more employees to establish a measurement period during the year to determine whether employees average 30 hours and are therefore eligible for fulltime health benefits. Surprisingly, 18 percent of companies believe this provision does not apply to them. Companies with fewer than 50 employees are not required to establish measurement periods. Twelve percent of respondents had fewer than 50 employees, Six percent of respondents with 50 or more employees believe this provision is not applicable to their business. A company with more than 50 employees that uses only full-time workers would not need a measurement period. Conversely, employers who have a variety of full-time, part-time and variable employees will need to establish a measurement period as outlined by the ACA in determining health benefit eligibility. An additional 5 percent of respondents with more than than 50 employees report being unaware of this requirement. 16

17 Associated Industries of Massachusetts Establishing the Measurement Period for Determining Health Plan Eligibility (n=197) Has established In process of establishing Does not apply to them Have not yet determined Don't know about Eligibility Period 5% 1 15% 2 25% 3 35% Several large, global employers have recently announced plans to discontinue health coverage for employee spouses when the spouse is eligible for health insurance through his or her own employer. We asked Massachusetts employers whether they plan to discontinue spousal coverage. Six of the 195 employers responding said yes; 24 employers said they are considering such a step while 165 companies said they are not considering discontinuing spousal coverage. Plans to discontinue health coverage to spouses who have health insurance available through their employers 3% 12% Yes Considering 85% No 17

18 HR Practices Report Recruitment Three quarters of companies report using employee referrals as a source of applicants. Thirty-eight percent of companies pay a referral bonus to the employee making the referral. The average value of referral bonus by employee classification is: Referral Bonuses Type of Position Average Range Paid Median Executive $830 $50 - $5,000 $500 Exempt $675 $50 - $7,500 $500 Non-exempt $480 $50 - $1,500 $450 How Companies Source Applicants Employee Referrals (n=168) Online Ads (n=159) Temp to Perms (n=114) Print Ads (n=107) Social Media (n=73) Contingency (n=71) Online Database (n=60) Retained Search (n=35) Percent Who Use Percent Positions Filled Flexible Work Arrangements 31% offer flexible work schedules 22% offer the ability to work remotely 13% offer a shortened work week Candidate Testing One-third of employers conduct behavioral and/or skill testing of applicants. Of those: 57% conduct personality/behavior testing 57% conduct ability testing (math, grammar, technical skills) 2 request writing samples for some positions 17% conduct formal assessments (problem solving, role playing) 18

19 Associated Industries of Massachusetts Reference Checking Fifty-eight percent of companies conduct reference checks on candidates for all positions; 22% of companies conduct no reference checks. Percent of Companies Conducting Reference Checks 8% 12% 22% 58% All Positions Select Positions Management & Exempt positions only Does not conduct reference checks Of the 78% of employers who conduct reference checks: 86% conduct professional reference checks with former supervisors 52% conduct criminal background checks 51% conduct professional reference checks with past HR Departments 41% conduct driving record checks 37% conduct a social security number trace 35% verify education 3 do a Massachusetts CORI check 11% conduct a credit check. Three out of four employers will conduct between two and three reference checks per candidate. 19

20 HR Practices Report Training and Development A significant number of employers have applied for grants from the Massachusetts Workforce Training Grant Program (WTFP). Enacted in 1998 and financed entirely by Massachusetts employers, the WTFP provides resources to businesses and workers to train current and newly hired employees. Express Grant Program Workforce Training Fund Express is a program designed for small employers and labor unions to quickly and easily provide training for employees. The program utilizes existing training courses for which a pricing structure already exists. A company is eligible for the Express Grant if there are 100 or fewer employees in all locations in Massachusetts. The limit on Express training funds is $3,000 per trainee and a total of $30,000 per company within a 24-month period. 8% of respondents to the 2013 HR practices survey say they have applied for a WTFP Express Grant. General Grant Program Training grants are awarded to employers, employer organizations, labor organizations and training providers. Companies of any size are eligible to apply. Training grants range from $2,000 to $250,000. Grant approval decisions will be made approximately 60 days after the application deadline. The focus of training under the General program is: Projects that will result in job retention, job growth or increased wages. Projects through which training would make a difference in the company s productivity, competitiveness, and ability to do business in Massachusetts. Projects where the applicant has made a commitment to provide significant private investment in training for the duration of the grant, and after the grant has expired. 39% of respondents to the 2013 HR practices survey say they have applied for a General Grant. Of the 106 companies that have not applied for a workforce training grant: 34% did not know about the program 16% felt the application process is too difficult 7% said they do not meet eligibility requirements 21% cited other reasons (undefined) Employers identify preferred methods of training delivery: (could select more than one answer) 47% prefer on-site training conducted by a third party 36% prefer on-site training conducted by an internal trainer 35% prefer Webinars 2 prefer public training 8% other 20

21 Associated Industries of Massachusetts Hiring Incentive Training Grant (HITG) Program The HITG is a program designed to encourage employers to hire Massachusetts residents who are military veterans or have been unemployed for 6 months or more. The HITG program does so by providing direct grants to employers to cover the costs associated with recruiting and training newly hired employees. Eligible employers may apply for grants of $5,000 for each new hire who meets the HITG program requirements. Employers may receive up to $75,000 each calendar year. Once approved, payment will be available to the employer once the new hire has retained employment for at least 120 days. Eligible employers may be approved for up to $75,000 per calendar year, based on the date that New Hire Trainees start employment. While only 18 percent of employers have their own internal training departments, 38 percent of employers have an established annual training budget. Three out of four companies report the effectiveness of training to be average to above average. The single biggest impediment to offering employee training is taking the employee away from work to deliver training. Barriers to Sending Employees to Training (n=113) Cannot afford time away from work Cost of sending the employee to training Programs not offered in geography Unsure what programs to send employee to Other Using Technology to Deliver Training Fifty-three percent of companies use online products and services for at least a portion of their training. 4 have used online training for management 4 have used online training for office staff 2 have used online training for sales staff 15% have used online training for warehouse and production staff 11% have used online training for remote workers Those who don t use online training gave the following reasons: 48% are not convinced of its value 37% don t know which programs to use 15% felt it was to expensive 21

22 HR Practices Report Survey Participant Demographics Two hundred and twenty-seven companies participated in this year s HR Practices Survey. Participation by AIM Membership Status AIM Member Non-Member Participation by Number of Employees 9% 7% 3% 34% 50 or fewer % 19% ,000 over 1,000 Participation by Region 27% 13% Boston Central 17% North West 26% 17% South 22

23 Associated Industries of Massachusetts

24 HR Practices Report