ERI UPDATE Quarterly Notes For ERI Subscribers

Transcription

1 Volume 73 ERI UPDATE Quarterly Notes For ERI Subscribers Data Research Evolution/Revolution When it comes to compensation decisions, it is the quality of the data that counts. But it is also nice that Assessor Series programs for a PC are thousands of times faster and more complex than web offerings, making our subscribers instant encyclopedias of reliable and sourced compensation information. In October 2005, we introduced the ERI memory key for our Consultant Assessor Series subscriptions. CAS subscribers can now receive these pen drives (rather than CD-ROMs) with License Codes, data and programs fully installed. Installation is no longer needed! Never be without immediate access to compensation data; carry the flash pen drive on a key chain or in a pocket, wallet, or purse. ERI is still beta testing this media, so keys are limited to CAS subscriptions. For old-timers, they work like 5 1/4 diskettes; you either run programs from the flash key or copy to a c:/eri directory, saving the cartridge as a backup or travel companion. Picture your CEO (at an off-site meeting) asking, How much does xxxx job make? and expecting an immediate answer. Plug the pin into any USB port and click on the ERI icon that pops up. It is an application of plug and play for professionals. Professional and Consultant Editions The majority of ERI subscribers utilize ERI s Assessor Series data to assist in compensation planning activities. Over the years, ERI has added features and datasets to Assessor Series programs with many of these enhancements designed for evidentiary purposes. Compensation planning applications are now found in Professional Editions of each Assessor Series release; litigation and corporate governance applications are found in the Consultant Editions, which include all Professional Edition features and all data from the UK/EU Assessor products (including a unique study of EU executive compensation levels). This Quarter s Highlights Looking Ahead to 2006 (page 1) Looking Ahead to 2007 and an aerie Conference (page 2) WSJ/ERI Executive Compensation Index (page 3) Datamining and the edot Skills Project (pages 4&5) SalariesReview esemantic Analysis espideri True TSA Skill-Based Pay Cybernetic System New Regulations & Reason for Revised Pricing (page 6) Renewal Offer for Calendar Subscribers (enclosed, page 7) ERI Software Installation Instructions (page 8) 2006 Salary Increase Planning ERI has two new resources to assist with salary increase planning. Salary Assessor software will soon include a Salary Increase screen/tab that calculates how different salary increase percentages (for positions with varying populations) might impact your organization s bottom line. The default increase percentages will be taken from ERI s new evergreen Salary Increase Survey and Forecast found at This survey reports forecasted competitive salary increase rates by industry, location, and job function. The latter makes this ERI report unique. It is FREE to participating subscribers who can access it via ERI s Platform Library Salary Increase Survey tab. Free in 2006, Professional edot & the CA Tax-Exempt Survey Editions To assist charities in meeting the administrative demands and costs imposed by new Federal regulations related to FLSA testing and executive compensation Intermediate Sanctions, both PAQ s edot and ERI s Compensation Comparables Assessor Professional editions will be complimentary in 2006 (see page 6). Click on any dot and see the source. Even better, with an Internet connection, retrieve the source Form 990/EZ/PF. Refine by industry, size, year, and/or area; this chart illustrates why executive analyses require industry segmentation th Avenue NE, Suite 100 Redmond, Washington U.S.A. tel fax info.eri@erieri.com

2 SALARY PLANNING FOR 2007 Salary Planning for 2007 & Inflation Assessor Series subscribers who have accessed their free ERI s 2006 Salary Increase Survey know that ERI is very positive about the current US economic outlook. (Participating Assessor Series subscribers can access this Report for free by clicking on the Salary Increase Survey tab on ERI s Platform Library.) We are, however, a bit unnerved by ERI s Subscriber Services Call Center (open 24 hours each weekday) is noting a flurry of calls from those engaged in far-reaching salary policy planning because: What does an employee do who finds that his/her lifestyle requires more money? The tough alternatives are: moonlighting, robbing a bank (we re joking), unionizing (still joking), borrowing from savings, going into credit card debt, fighting for a promotion or searching for a better-paying job. The easy alternative is asking for a raise. Subscribers are reporting an ever-increasing number of employees asking for more money. The most often stated reason for these requests is the rise in cost of living, even though they read with amazement US government reports that inflation is moderate (3.5% annualized in August, 5.1% annualized as of September, 4.3% annualized as of October 2005). In reality, employees are seeing increased costs at far higher levels. Consider this: if an employee s family drives 18,000 miles per year in autos that average 15 miles per gallon, and the cost of gasoline has gone up (on average) $1 per gallon, then driving now costs $1,200 more than it did a year ago. In addition, the US Federal Reserve s key interest rate has risen 14 times since June 2004 (and that was the first increase in 4 years). Coastal housing prices are still headed toward outer space (along with rents), and winter is here (with heating bills doubling for approximately half of the populace which uses natural gas). Health benefit costs continue to rise at double-digit rates. And at some point, fuel prices have to affect the price of services and consumables. If the average American earns $35,000 and has take-home pay (after taxes of all types) of $1,800/month, how are these increased costs to be covered? With $100/month here and $100/month there, it subtracts down. And the US government still must find the funds to pay for $200 billion in Iraq, $200 billion for Katrina and Rita, $500 billion for pharmaceuticals for those on Medicare, and extra money for its own fuel bills and rising interest payments. Can tax increases be far behind? (The President s Advisory Panel for Federal Tax Reform Report of Nov 2005 recommended a value added tax and elimination of home interest deductions; both would result in significant tax increases.) For taxpayers, 2007 could be known as the Year of the Fight to Stay Even. And because of the change in US bankruptcy laws (10/ 17/05), those Americans living lifestyles above their earnings will have no escape. Use of credit cards will soon surely be curtailed. All this means 2006 will be a good time to review your organization s salary policies. Do you pay competitively at levels reflecting the demand and supply of labor? Or do you reflect social concern by adjusting for cost-of-living increases? Beginning a period of inflationary (even if we think it will be mild) recession on a sound policy footing could pay long-term dividends. Potential Survey Participant & Subscriber Meeting We are considering hosting a subscriber conference in San Francisco April 23-25, If you would be interested in attending, please give us a call at or a note to info.eri@erieri.com stating your interest in participating in one of the planned research workshops. We ve tentatively scheduled Drs. Lawler, Schuster, Thomsen and Zingheim as keynote speakers, and all have also volunteered to participate in the research workshops. This Conference is intended for the pure compensation/job analyst/ salary administration professional and is not a general HR type annual/national meeting. Continuing educational credits (via the ERI Distance Learning Center) will be available, and you will have a chance to mingle and meet with ERI research staff. We plan to cover, in-depth, our new 2006/2007 product/research projects: - valuation/comp 8-K data - plant relocation labor costs - skill-based pay modeling - online interactive surveys View ERI s Increase Survey on-line and/or ed via a PDF report. Workshops will take the form of: Introduction to Topic, then three presenters of research projects, and then an experienced professional will lead a discussion with audience interaction. This conference will follow the SIOP research/information presentations model with costs targeted to allow subscribers or students to pay their own way. 2

3 EXECUTIVE COMPENSATION 2005 ERI Executive Compensation Index Wall Street Journal/Career Journal Princeton, NJ and Redmond, WA - The highest paid executives in America saw their total cash compensation increase over 2004 levels. The November 2005 Total Cash Compensation Report for the 45 highest paid executives is 7.64% higher than the 2004 levels, according to the Executive Compensation Index figures released today by ERI Economic Research Institute and CareerJournal.com. The November 2005 index shows Total Cash Compensation near the levels of 2001 which were prior to the effects of September 11, 2001 on the economy. The 2001 level of Total Cash Compensation was $3,683,131 compared to the November 2005 level of $3,653,559. Base Salaries For the highest paid executive and based on companies reporting year to date, the average base salary stood at $1,277,944 compared to 2004 base salary levels of $1,239,217. This reflects a 3.13% increase in base compensation over Annual Bonus For the highest paid executive and based on companies reporting year to date, the average annual cash bonus stood at $2,375,615 compared to year 2004 annual cash bonus levels of $2,154,898. This reflects an 10.24% increase in annual cash bonus over Total Cash Compensation For the highest paid executive and based on companies reporting year to date, the average total cash compensation (base + bonus) stood at $3,653,559 compared to year 2004 total cash compensation of $3,394,115. This reflects a 7.64% increase in total Cash Compensation over 2004 levels. The Total Cash Compensation Index reflects data submitted in 2005 for a randomly (among monthly reporting dates) selected group of 45 publicly-traded companies among the 6,500 that report compensation data to the SEC. This average comparables group is from the population of publicly-traded corporations which in itself has been decreasing in size (after Sarbanes-Oxley). Much like health care costs (again seeing double digit increases) as compared to other cost of living measures, executive total compensation increase rates continue to be triple those of the rank and file. Short term, the impact is barely noticeable. Long term the result is very apparent (the Rule of 72 tells you how many years it takes a sum to double; 12% divided into 72 would be 6 years; 3% would be 24 years). 3

4 COLLECTION OF JOB SKILLS Background There once was a debate about whether job families (occupational groups) or occupations (specific jobs found in salary surveys, required in disability determinations, posted on job boards, etc.) are sufficient for national data collection efforts. ERI/DOT favors and uses the latter, studies of specific jobs. Hidden within this debate were the use of skills. The U.S. O*NET collects task and skill requirements common within job families; ERI/PAQ/eDOT collect and analyze specific skills required to complete specific jobs work tasks. ERI s experience is that employers hire, reward and plan around skills which are finite. The edot Skills Project has been collecting task & skill statements in its data collection efforts since 1997, 2000 and 2004 respectively from the sources below, along with job analysts input since SalariesReview.com Survey Collection PAQ Field Job Analysts Questionnaire edot FLSA Module (1 of 8 collecting modules) (mainly US data, with a Patent won 3/1/05) (since 1972, a million SME JAs completed) (new as of 8/23/04 US Reg 541) espideri Using ERI s own proprietary Internet spider, SalariesReview.com s interactive salary survey can now be enriched with data mined from the Internet; benefit costs, demographics and costof-living data also enrich its surveys. Most exciting, we can also mine and match for skills required in job postings (spiders can search most job boards, corporate listings, State One-Stop sites, etc.). Originally created to accurately match salary survey descriptions, espideri sets the stage for true TSAs. Cybernetic System espideri joins the edot Skills Project as a tool where each use of the edot software, each search by the spider, each input by visitors at ERI s supported Internet sites, and every job analyzed by subject matter expert field job analysts adds to ERIs and PAQ s knowledge of external compensation practices and the evolving nature of work in America. The more edot is used, the better its data becomes. The better edot s data becomes, the more reason to use edot. TRUE TRANSFERABLE SKILLS ANALYSES The Disability Determination Process The edot Skills Project also collects job demands, physical and mental work characteristics used in RFC (residual functional capacity) assessments. Added to edot s unique skill statements (identified as singular verbs: drives, manages, translates as opposed to the US O*NET s drive, manage, translate reflecting job family nouns ) along with ERI s espideri (described above), edot (Consultant edition, Custom) has a unique and new edot Transferrable Skills Analysis potential: 1. A person s physical location (resident street address), distance, and counties of potential employers (distance determines the individual s employment area ). 2. A claimant s past industries of employment and jobs held define the probable skills achieved/utilized. 3. Added to education, station in life, training, age, etc. 4. Job availability is estimated by NAICS in US county(ies). 5. Along with valuation of listed skills by industry (knowing that one may have done lots of jobs for an employer). 6. Add edot s 99 work measures (RFCs estimates from past history) versus the claimant s present situation (including SSA s 4357BK desk paper questions, all found in edot) Create a listing of alternative edot jobs available. 9. And a list of Potential Employers in the employment area. 10. Illustrate postings on job boards for occupations where claimant s skills and RFCs can meet stated requirements (found by ERI s espideri s software daily/archive search). The careful reader will note that the red points illustrate new technologies not part of either SSA, state workers comp, LTD judicial or legislative DDP or pre Jan 2006 edot methodologies. Necessity is the Mother of Invention. In early October 2005, the State AG of California forged a new stipulation with LTD carriers (see for details). It changes everything. California s New Total Disability Definitions.... during the another or any-occupation period shall be defined as: a disability that renders one unable to perform with reasonable continuity the substantial and material acts necessary to pursue his or her usual occupation in the usual and customary way and to engage with reasonable continuity in another occupation in which he or she could reasonably be expected to perform satisfactorily in light of his or her age, education, training, experience, station in life, physical and mental capacity. This change shall be made in all new California Contracts...

5 IN THE edot SKILLS PROJECT Tasks are Infinite, Skills are Somewhat Finite, and Worker Behaviors are Finite ERI and PAQ work with job titles; sometimes 3 letter abbreviations (e.g., State of California workers comp files) or simple nouns (from Form 990s, SEC filings, etc. optical reading). Job titles often have alternative titles. ERI also often works with brief survey descriptions that capture the basic elements of the job title (common to salary surveys) while full job descriptions contain multiple task statements (the DOT/ edot construct for occupation ). The new US FLSA Regs call for Primary Duty. Job posting focus on skills; tasks = duties. Jobs = occupations; job families = occupational groups; these are old terms, originally from the abandoned US Dictionary of Occupational Titles, the language of work. Today, O*NET uses occupations = job families, as they dumb down our language and attempt to hide the fact that they work only with ~ 750 occupational groups. They have, however, captured skills found in these groups along with job family work task statements. (Their impossible challenge is to make something specific out of this job family stew.) Task statements start with a verb with related objects. Tasks require certain knowledge, skills & abilities (KSAs) to successfully complete them. The quality of the held KSAs is one s competency. Skills are also (to confuse matters) described in terms of verbs and objects (edot has ~ 2,500). The old DOT called these: 1) work fields and 2) materials, products, subject matter, & services defined in the form of an SIC-like industry table. Although numerous, skills are finite and can be applied in infinite tasks. Again, tasks are infinite, work behaviors and skills applied are finite. To create simplicity from the infinite, the framers of the old DOT adopted selected characteristics of occupations/jobs (SCOs) which were defined in terms of 64 worker measures (note: worker, as they are elements affecting behavior) ranging from strength, SVP, job demands, work conditions, to aptitudes and temperaments required. PAQ s edot Skills Project has increased these to 99 measures to accommodate stress demands and other modern-day reasons why individuals can no longer work (the need to sit/stand, reach upwards, etc.). As used today, these measures frame the reasons for, and language by which, 20 million Americans receive disability checks (~ 1/3rd of all SSA Disability Insurance claimants win disability because of mental/cognitive incapacities). US Secretary of Labor Chao summed up the DOL s position in a Spring 2005 interview: to train workers for jobs that exist in the real world. We want to link the state and local boards that run these programs with employers who actually have jobs to offer. p. 24, HR Resource Executive, June 2, The US Government is interested in data mining Internet and other job postings to identify the skills now required for jobs in real-time and then to adjust funding for training programs to better train for the skills required for the task and skill statements found. ERI and PAQ have been working with job boards since Our original interest was in identifying jobs for inclusion in the Salary Assessor, then for edot job availability numbers. We have also scraped (now aided by our espideri) posted pay rates for SalariesReview.com s surveys (but not for the Assessor Series data, as posted values are typically high). We ve also collected skills and geographic area data (see California LTD settlement, see page 4). ERI can now value skills. SKILL-BASED PAY Until Now, An Unfulfilled Promise Much has been written regarding skill-based pay in the past decades. Most skill discussions are empty shells where meaningful data and systems useful for decision making are missing. Yet if organizations hire for skills, organize around skills, terminate and transfer personnel for lack of skills, and pay for skills, it only stands to reason that a system that collects, stores, and analyzes skills and worker characteristics should have usefulness in pay decision processes. Ultimately, subscribers will be able to review and use: 1. Pure market pricing (Salary & Executive Assessors) 2. PAQ Job Evaluation pricing (in use since 1972) 3. Valuation of Individual Skills (Skill-Based Pay Assessor) 4. esemantic Analysis (blending SA/XA jobs by relevancy) The valuation of skills (logical if one takes time to think about it) has the same dynamics as the valuation of a position (position names are oftentimes a shortcut description for the skill required). The value of a skill can vary by its application to a task, and by its application to the size or industry in which it is employed. Skills become refined over time, and like positions, there are maturity curves that can be traced. The problem lies in the details (and the data). One would need timely knowledge of specific skills applied in specific jobs. One would need knowledge of pay by industry, organization size and location. ERI is already reflecting this data in the Salary Assessor. 5 Using technology like the Spideri we believe salary and wage, job availability, and potential employer surveys, along with transferrable skills analyses, recruiting, and educational planning/ funding have exciting new futures.

6 REVISED PRICING FOR 2006 New Regulations with No Source of Cost Coverage Nonprofit Intermediate Sanctions relating to executive compensation and new DOL regulations relating to overtime exemption testing are the first ever IRS corporate governance statutes for nonprofits and the first in 45 years revision to the FLSA. Both share in common the fact that charities and nonprofits must allocate time and resources for compliance. Most charities do not have a budget for salary surveys, let alone new compensation compliance regulations. ERI estimates that establishing a rebuttable presumption protecting both a Board and the management team will take 90 man hours per organization; FLSA testing might take 10 hours. What is 3,000,000 charities and nonprofits x 100 hours x $100/hour (to be conservative)? It s $30,000,000,000/year. We exaggerate (perhaps), but what is clear is that by comping (a License Code is required) nonprofits with FREE Professional editions of edot and the Comparables Assessor, ERI can potentially save charities far more dollars than any monetary gift that we might ever donate. This, however, necessitates our revising ERI s pricing of the 2006 Combined and Assessor Series found in the July and October newsletters. We apologize; we know it will cause hassle, but the good created should outweigh any negatives. The new pricing logic: 6

7 To help charities meet IRC 4958 s demands, ERI DLC courses, edot & CA Professional editions will be free in 2006 ERI PRODUCT ORDER SHEET ERI s ASSESSOR SERIES software databases (single annual subscriptions, updated quarterly, most recent data) ERI s Salary Assessor & Survey Professional Edition SA $ 889. $ Consultant Edition (with added executive/director titles, also UK/EU data) SA+ $ 2,389. ERI s Geographic Assessor & Pay Survey Professional Edition GA $ 889. $ Consultant Edition (with immigration/census/oes data, also UK/EU data) GA+ $ 2,389. ERI s Relocation Assessor & COL Survey Professional Edition RA $ 889. $ Consultant Edition (plus international areas/cities & labor cost model) RA+ $ 2,389. ERI s Executive Compensation Assessor & Survey Professional Edition XA $ 2,389. $ Consultant Edition (EU data in addition to U.S. proxy/10-k) XA+ $ 3,279. ERI s Compensation Comparables Assessor Professional Edition CA $ 889. CA free in 2006! Consultant Edition (all data, trend and historic analyses) CA+ $ 2,389. $ PAQ s enhanced Dictionary of Occupational Titles Professional Edition edot $ 489. edot also free! Consultant Edition (new jobs, 35 new SCOs, job availability stats, etc.) edot+ $ 889. $ (License Rider required with edot+) ERI s Platform Library ERIPL free COMBINED SERIES software databases (single annual subscriptions, updated quarterly) Full Assessor Series FAS = SA, GA, RA & edot $ 2,223. $ Disability Assessor Series DAS = SA+, GA & edot $ 2,973. $ Remuneration Assessor Series RAS= GAuk/eu, SAuk/eu, RAuk/eu & XAuk/eu 1,912. Professional Assessor Series PAS = FAS, CA & XA $ 3,862. $ Consultant Assessor Series CAS = PAS & SA+, GA+, RA+, CA+, XA+ & RAS $ 4,668. $ (License Rider required with edot+) NETWORK SUBSCRIPTIONS A separate license is required for each individual user. Assessor Series Price $ X the # of users = $ OTHER RESEARCH PRODUCTS ERI s Geographic Reference Report 2006 (single hardcopy edition) GREF $ 489. $ ERI s Distance Learning Center (compensation courses at all courses are free in 2006! 2006 Salary Increase Planning Survey (on-line at $ with participation-- (free for participating Assessor Series subscribers via ERIPL, $159 for non participants) International orders: Foreign duties/taxes are a subscriber s responsibility Subtotal For CA and WA subscribers, add applicable sales tax: Your Name: Title: Organization: Address: Tel: Fax: Credit Card Type: Credit Card #: Exp. Date: (Visa/American Express/Master Card) Purchase Order Number (or Credit Card Signature): th Avenue NE, Suite 100 Redmond, Washington U.S.A tel fax info.eri@erieri.com U.S. FEIN Total $ $ $ 7

8 (See: Install.txt) INSTALLATION GUIDELINES INSTALL/UPDATE ASSESSOR SERIES FROM CD-ROM ERI s quarterly dataset updates are provided via Internet download, memory key, or CD-ROM. All Assessor Series applications and their Demos can be accessed and/or installed from ERI s Platform Library CD-ROM. In 2006, the Professional editions of the Compensation Comparables Assessor (CA) and the enhanced Dictionary of Occupational Titles (edot) are free (call for a license code if your subscription does not already include CA and/ or edot.) These free datasets are intended to assist charities. To install from CD-ROM: 1 Check the date printed on the front of the Platform Library CD-ROM to make sure that it is for the most recent quarter. 2 Place the CD-ROM in your CD-ROM drive and shut the drive door. 3 The CD-ROM should auto-run (may take up to 15 seconds). If after 30 seconds the CD-ROM does not auto-run, contact your organization s internal technical support department. Something may be wrong with your CD-ROM drive or device drivers. To manually run the CD-ROM: a) Click the Windows Start button. b) Select Run. c) Type eri.exe. d) Click the OK button. 4 Once the CD-ROM runs you will see the Platform Library window, and you may be prompted to install or update: New subscribers may select Install from the Options for New Users dialog. If you are a returning subscriber with a prior quarterly update already installed, click Yes when prompted to update. You may also select any option from the To Install menu (at the top of the Platform Library window). If you are adding a new product to an existing subscription, click Ignore to input a new license code. CURRENT SUBSCRIBERS: AUTOMATIC UPDATES Each time one of ERI s Assessor Series software applications is run on a computer with an active Web connection, the application s automatic update program (XXXXXupdate.exe found in each installed program s directory) checks for new updates on the Internet. Users are prompted when new updates (quarterly updates as well as occasional mid-quarter updates) are available. To update, close the running Assessor Series application, then follow the automatic update instructions. This is the easiest option for subscribers the automatic update program does all the work of downloading, extracting and installing the latest files. CURRENT SUBSCRIBERS: MANUALLY UPDATE ERI S DATA FROM THE WEB Subscribers may also manually download and install the latest updates. 1. Go to and click Updates, then the download link for the appropriate Assessor Series software product. 2. Follow the instructions posted on the right side of the Updates Web page in your Internet browser. INSTALL/UPDATE FROM A MEMORY KEY (CAS Subscribers) No installation required. ERI does all the work of installing your personal subscription to the Memory Key. Simply plug and play! GENERAL INSTALLATION INFORMATION ERI s software applications are designed to run on Windows NT, 2000, ME, and XP. Each quarter a CD-ROM is mailed to subscribers from which all software applications may be installed. Pre-installed memory keys are also available. In addition, all software applications may be downloaded and installed from the Internet. For more information on installation options, please select Help Topic Search from any of ERI s software applications and search for related topics using the keyword installation or visit ERI s Online Technical Support (from click Support, then click Free Online Technical Support). Better yet, sign up for an Assessor Series Conference Call Symposium (from click Support then select Free Conference Call Training). Call any weekday; we are staffed 24 hours/ workday, From Europe, call ERI Economic Research Institute, Inc. U.S. FEIN FEDLINK ER Duns Cage 0XP39 ERI continually endeavors to provide consistently excellent marketpricing information relating to compensation, cost-of-living, HR demographics and employee benefits. ERI DOES NOT PROVIDE CONSULTING, ACCOUNTING OR LEGAL ADVICE, AND ERI DOES NOT PROVIDE CONSULTING SERVICES OR ACCEPT FEES RELATING TO CONSULTING SERVICES, WHETHER OR NOT RELATED TO COMPENSATION OR EMPLOYEE BENEFITS ISSUES. Copyright 2006 ERI Economic Research Institute, Inc. Patent # 6,862,596, others pending. All rights reserved. Assessor Series and edot software research products are registered trademarks of ERI in the United States and/or other countries. All other trademarks, trade names, or company names referenced herein are used for identification only and are the property of their respective organizations. 8