ERI UPDATE. Quarterly Notes for ERI Subscribers. October Volume 96

Transcription

1 Volume 96 October 2011 ERI UPDATE Quarterly Notes for ERI Subscribers Salary Increases in 2012 By this time, you already know that associations and consulting firms agree that the average US salary increase in 2012 will be 2.8%. ERI doesn t necessarily believe that will be the case, especially for its subscribers, who can be characterized as private employers with over 200 employees and at least 3 branch offices who don t use step salary administration systems. City, county, and state governments universally use step systems (blue in the graph below), while some utilities, most public schools, social services, and some private entities dissatisfied with merit systems also use automated steps (below in grey). Step organizations skew salary increase surveys upward. The next five years bode ill for users of step approaches; that said, they are difficult to alter (just ask employers in Racine or Athens). For more about 2012 plans, see ERI s Salary Increase Survey, free to Assessor Series subscribers. ERI Salary Surveys The key to getting the best data possible from a survey is to participate! ERI Salary Surveys offers more than 125 industry-specific salary surveys and 18 job function salary surveys. Participation opens on October 1. Data collection extends from October 1 to March 31, and all salary surveys will be released in August Participate and receive results at a 50% discounted rate, plus a complimentary electronic copy of the Executive Summary, when the survey results are released. You may submit your data online or access an Excel copy of the questionnaire for submission by . Salary survey results may be purchased on a national or state basis. Visit for more information or contact us at When you purchase any of our compensation surveys, you not only receive actual survey participant data collected through the period, but also two additional sources of data to use for comparison purposes. The additional two sources include compensation for jobs in tax-exempt organizations and compensation for jobs in publicly traded or for-profit organizations. Special Offer: ERI Assessor Series subscribers who participate in ERI salary or benefit surveys will receive the full survey report free of charge. Just access the survey questionnaire through the Survey Questionnaires button on the ERI Platform Library. A Summary The US government and general opinion are reporting this: 2.8% average salary increase (less turnover, etc.) 2.3% private sector salary structure growth (BLS August 2011, Here is what ERI finds: 1.2% growth for in ERI Salary Surveys jobs 1.4% salary structure default in the Assessor Series - 0.3% (expected) nonexempt job board growth 3.2% (expected) exempt/skilled job board growth - 0.8% free salary site job growth (exempt status unknown) ERI predicts the following for 2012: 2.6% average salary increase 2.1% structure movement Quoting a subscriber s recent comment, If they were happy with a 3% increase in 2011, they should be happy with a 3% increase in ERI Salary Surveys report data as is much like the Nonprofit Comparables Assessor, Occupational Assessor, and Relocation Assessor. The Executive Compensation Assessor, Salary Assessor, and Geographic Assessor, on the other hand, are analytics that combine the best of all sources and minimize data swings (or vagaries) so that values may be trustingly used from quarter to quarter. Overtime Exemption Testing The collection of primary and other duties (for the US FLSA maximum threshold test and/or the nine state tests with required percentages of duties) provides a hidden benefit of reviewing who does what and an individual s primary task. For ERI, refined job descriptions are the heart of salary survey use (i.e., job matching). For the organization, task definitions provide additional insight; here is the task list for ERI s Salary Assessor Data Manager, offering the reader a view of the Assessor Series that otherwise might be unknown. Manages preparation of quarterly datasets for the Salary Assessor (the primary duty). (continued on page 15) th Avenue NE, Suite 100 Redmond, WA tel fax info.eri@erieri.com Vancouver, BC London, UK

2 A DIffERENT look AT 2012 PlANNED INcREASES July 2011 State coincident Indexes The US OES Salary Survey This US government job family survey is really a head count with check marks entered into salary/wage range boxes. This explains the use of relative standard error for the reported rate of error and the reason why the top value shown for 2011 is $187,200, no matter what the pay. (The top check box is $90/hour and over.) Data reported in July 2011 was from the period and indicated modest salary structure growth throughout the US. Showing Red Again US job growth is slow, and ERI now projects a full recovery in 2017, at the earliest. A decade will have elapsed and, in its wake, many baby boomers will find themselves competing with a new generation that is better educated and highly motivated. For those employed, a job has become a treasured asset; fewer American workers quit their jobs in the first nine months of 2011 than in any comparable time in the last half century. The Federal Reserve Bank of Philadelphia produces a monthly economic report for each of the 50 states, released a few days after the Bureau of Labor Statistics (BLS) publishes employment data for the states. The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic: nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (US city average). The trend for each state s index is then set to the trend of its gross domestic product (GDP). The view is of an increasingly competitive environment for US business and for skills. looking at Salary Increases Another Way ERI analytics include the daily collection of salary data from job boards, with the same feeds Google uses (under lease), representing approximately 500,000 job postings daily since July of Assume for the moment that job boards typically do not post unskilled jobs and that top management jobs are underrepresented. Job boards focus on many of the same job titles as do salary surveys. The earnings values from job boards are usually higher than salary surveys as they are used as a recruiting tool. That said, like job titles on job boards show ever decreasing trends for wage/ salary growth. From August 2009 to August 2011, job boards indicated negative growth for more than one in four job families. One hears it in the statement, We are offering the starting salaries we offered in October s Geographic Assessor contains the new OES (H-1B) prevailing wage rates. ERI finds many small US entities using the OES/O*NET rates (with averages higher than reality), making overpayments likely. The Assessor Series Online Both the Relocation Assessor and Occupational Assessor are in online beta testing, with enhanced capabilities for international comparisons in the former and new FLSA overtime exemption testing features in the latter (see page 3). ERI file servers now receive queries from web browsers in the following ratios: 1. Internet Explorer 52.73% 2. Mozilla Firefox 18.98% 3. Safari 11.70% 4. Chrome 11.61% 5. Android Browser and others 5.64% It is not totally a Microsoft world out there anymore. Please call ERI s Subscriber Services if you have a browser problem (or any other concerns). We stand ready to assist. October Economic Research Institute Update

3 OccUPATIONAl ASSESSOR & OvERTImE ANAlySES Overtime Exemption Tests Here s how ERI subscribers are creating a library of on file classification analyses (for US Wage and Hour auditors): Establishing an Occupational Assessor (OA) online subscription (using the account number of one s Assessor Series subscription). Using the Occupational Assessor PC subscription to model, capture, and potentially reshape jobs, and then saving those analyses to both one s PC and the online account on ERI file servers so that these analyses may be easily shared and worked on by other managers (while maintaining the confidentiality of salary and initial trial classification analyses). Using the Occupational Assessor online subscription to define and refine state analyses (key for branch offices in certain states). States where a job may still be nonexempt despite passing the US FLSA exemption tests are shown below. Differences in job analysis measures abound; the most problematic are management policies versus management and the percent of duties threshold in which duties must be defined as professional, administrative, executive, etc. The new 2004 US tests hold unique treatment for outside sales and computer programmers; certain states redefine (or ignore) these new tests. Also, 378 jobs, job families, and industries are cited for special treatment by various states (e.g., registered nurses in California). See One starts an online classification analysis by building a roster of jobs and departments and then by assigning one s employees within that structure. Overtime analyses can be completed, saved, and accessed from the online subscription. ERI s overtime analysis site is shown below. A change of Thinking A job s recorded task list was once feared to be a smoking gun. Today, not having a defined primary duty is the red flag. Wage Theft New York s Wage Theft Prevention Act, effective April 12, 2011, requires employers to notify newly hired employees of both their regular and overtime pay rates. The NY Labor Department added the recommendation that employers inform employees of the type of exemption claimed if the employee is deemed exempt from overtime requirements (logically mandating that an analysis be completed for legal defense purposes, otherwise opening an employer to liability). Even though the US DOL still considers this an agenda item, there are initiatives in process in San Francisco, a South Florida Wage Task Force, and more (search the web for wage theft and the state name). There is a compelling reason why this subject will not disappear: forcing employers to pay more for incorrectly identified exempt jobs, where extra hours are worked, makes creating a new job logical, thus increasing employment. October Economic Research Institute Update

4 geographic ASSESSOR & PAy SURvEy View a Two-City Comparison of Salaries/Wages Example Screens Refine Areas by ZIP, Radius, City, County, State, or Province Observe Comparisons from Non-Confidential Sources Any Assessor Series Analysis Anytime Customize Reports with Analyst and/or Firm s Name Retrieve Published OES (H-1B) Prevailing Wage Rates Trend US Census Demographics by Area Review Published Rates of Error October Economic Research Institute Update

5 geographic compensation DATA geographic Salary Differentials ERI s Geographic Assessor & Pay Survey (GA) is an easy-to-use desktop data program that contrasts geographic wages/salaries and renter costs among almost infinite combinations of headquarter and branch office locations. It also provides area demographics (US Census), immigration prevailing wage rates (OES), and state minimum wage information. Over five thousand subscribers utilize this unique research software application to set salary structures that are cost effective and competitive. Relationships are derived from millions of data points gathered from ERI s patented online surveys, traditional ERI Salary Surveys, digitized public records, OCR of IRS returns, loan verifications, and other licensed UK, Canadian, and US salary surveys and datasets. GA is available in two versions: the for US and Canada salary planning and the Consultant Edition for US H-1B and EEO-1 compliance reporting and UK/EU remuneration planning. GA is for wage and salary planning. It includes these features: Define a city, suburb, or state as the base city and review any pay level comparison in currency, variances, or percents Calculate values for six earnings levels (e.g., grade midpoints) View wage and salary differentials for about 8,200 US and Canadian cities (areas may be defined as within a radius ) Create a user-defined area representing the recruiting area Use the national or state average (or a percent of the national) Review EEO-1 statistics for over 6,100 jobs as reported by 2000 Census databases, also restated with 1990 Census definitions Compare renters cost of living versus area wage differentials Rank, sort, save, load, export, and/or retrieve data Data reflect demand and supply of labor, not goods and services GA+ is for in-depth research for consulting or compliance. These features are included: All GA data and features Analyze data for almost 1,300 UK and EU cities/areas Profile geographic differentials above $100k Utilize published US OES (H-1B) prevailing wage norms (with historical data for years 1996 present) Review trended (to present dates) EEO-1 race and gender statistics for any of the US job titles profiled Assist with OFCCP reporting by area, industry, jobs, etc. View job zones, SOC descriptions, and SA s library of over 6,100 job titles and descriptions RESEARch TOPIc: geographic DIffERENTIAlS Compensation professionals once assumed that geographic differentials disappear for top-level management, as the market for executive talent is national. In the past, no one had ever been certain of this because there are so many variables and so little data were available. Privately held corporations, until web services began creating values, were the black hole of executive salary surveys. Only 6,862 US publicly traded firms report compensation in any one year. After taking into account size, differing job functions, and industry practices, these numbers are too low to deduce geographic differences. The creation of ERI s Nonprofit Comparables Assessor & Tax-Exempt Survey, with millions of observations, has changed this. Hospital CFOs at $100 million revenue are shown below (from the July release). Differences do exist: Arizona California Florida Illinois 183, , , ,142 Kansas Minnesota New York Wisconsin 186, , , ,486 October Economic Research Institute Update

6 RElOcATION ASSESSOR & col SURvEy Example Screens View a Two-City Cost-of-Living Comparison for Renters View a Two-City Comparison with Home Ownership Create a Benchmark List of Branch Offices Costs Review ERI s US CONUS Estimated Per Diem Shortfalls International Analyses to Clients and Employees Refine International Analyses with Tax Equalizations Select Areas by Radius, ZIP, City, County, State, or Country Assess the Labor Cost Impact of a Plant/Office Relocation October Economic Research Institute Update

7 RElOcATION DATA AND ANAlySES Two city cost-of-living Analyses ERI s Relocation Assessor & COL Survey (RA) is a desktop software application that compares cost-of-living (COL) levels in over 11,200 locations worldwide. HR professionals and consultants use this software to calculate relocation bonuses/ allowances (or salary adjustments) for transferring employees. Relationships are derived from thousands of cost-of-living data points gathered via ERI s patented online surveys, traditional ERI Salary Surveys, digitization of public records, ERI s provision of web services, and other licensed UK, Canadian, US, and international cost-of-living datasets. Create detailed two-city costof-living comparison reports in house with this database program. RA is available in two versions: the for US and Canada COL analyses and the Consultant Edition for US plant relocations, worldwide labor cost analyses, costing proposed HR policy changes, and global international COL comparisons. RA is for HR planning and decision making. It includes these features: View COL differentials for about 8,200 US and Canadian cities Create unlimited numbers of customized printed reports Vary input for an employee s earnings, home size, home ownership or rental, family size, the number and value of automobiles, and distances driven Contrast cost-of-living increases for multiple earnings levels Calculate values for five different earnings levels (for renters) Compare cities individually or grouped into user-defined locations based on commuting distance of a local labor pool Review finer neighborhood breakouts for major cities Data reflect demand and supply of goods and services, not labor RA+ is for in-depth relocation research. It includes these features: All RA data and features Perform renters analyses in over 11,200 cities worldwide Select an organization and review the impact on labor costs of a plant relocation to any city in the US Define your organization s labor cost profile and assess the change in costs with a change in HR policy Tap into other online international data sources, including public domain data from ERI, the CIA, the UN, etc. Rank, sort, save, load, export, and/or retrieve data; consultants may personalize printed reports with software assistance Review costs in the suburbs favored by those relocating SAlARy AND col DIffERENcES geographic cost of living versus Salary Differentials Cost of living (COL) reflects the demand for and supply of goods and services, while salary differentials reflect the demand for and supply of labor. ERI s Geographic Assessor reports salary differentials derived from regression analyses where local area salary survey positions are compared to national norms by job or job function. Competitive salary structures assure that organizations neither underpay nor overpay for labor. Employees often confuse competitive pay with COL. What families spend is predicted by the data reported in the Relocation Assessor software: rental rates, housing prices, income taxes, property taxes, gasoline prices, medical costs, and the prices found in major retail grocery and drug stores. COL differentials, as reported by ERI, reflect cost models (e.g., an automobile driven x miles/kilometers of y value). Salary administrators focus on cost efficient salary levels. Those in Human Resources hear the other side of the story; it is often easier for a key employee to fill a cost-ofliving shortfall by changing employers than by negotiating with his/her present employer. Inflation The US economy is filled with slack that absorbs inflationary pressures. As soon as the economy turns around (and it will), America s new money will chase a finite amount of goods and services, the foremost of which is talented individuals skill sets. ERI is forecasting significant inflation in 2012 due to these factors: 1) inflation increases sales, excise, and income tax dollars (the latter moves people to higher tax brackets look for no US alternative minimum tax relief); 2) inflation decreases government debt in terms of today s dollars; 3) inflation would solve the upside-down US home mortgage problem; and 4) inflation, which triggers COL increase payments, makes constituents of the populace where politicians become the source of income increases for those on disability, unemployment, or in retirement. We are watching the creation of perfect storm conditions for those managing the pay of skilled individuals. During inflationary times, key employees easiest defense historically has been to find higher compensation elsewhere. October Economic Research Institute Update

8 SAlARy ASSESSOR & SURvEy Profile Individual Jobs Salaries by Experience/Size Example Screens Profile Individual Jobs Salaries by Level Produce Customized Benchmark Listings Create a Set of Area Benchmarks for a Single Job Plan Salaries by Department Easily Include Executive Level Positions in Analyses Access Employer-Provided Data from Other Countries Review Rates of Error for a Daubert Challenge October Economic Research Institute Update

9 SAlARy SURvEy DATA Salary Survey Data ERI s Salary Assessor & Survey (SA) reports the most robust competitive wage, salary, and incentive survey norms available. Each job has been studied over time, many jobs since Job content is updated via PAQ s edot Skills Project. Analyses are derived from millions of data points gathered annually from ERI s patented online surveys, traditional ERI Salary Surveys, digitized public records including the US SEC, loan and employment applicant earnings verifications, OCR of US nonprofit IRS returns, and licensed UK, Canadian, and US salary surveys and datasets. ERI research saves subscribers time and expense, providing analyses of competitive pay for over 6,100 jobs defined by area, industry, and size. Most of the US Fortune 500 companies use Assessor data to review competitive wage/salary and incentive levels. SA comes in two editions: SA is for today s salary planning. These features are included: Review salary ranges and mean/median values for over 6,100 positions in 312 US and Canadian metro areas (expand analyses to about 8,200 US and Canadian city locations when used in conjunction with ERI s Geographic Assessor) Calculate competitive levels of salaries, incentives, and total compensation by area, industry, size, and planning date Set up a user-defined area representing the labor market pool from which a workforce is (or will be) recruited Create a hybrid job with custom weighting Quickly create a benchmark list of competitive rates Review reliability statistics (standard error and number of observations) provided to meet Daubert challenge criteria Research salary practices and levels in 1,123 industry sectors SA+ is for in-depth research for consulting, compliance, or litigation support and for planning salaries for executive and director level positions. These features are included: All SA data and features Analyze salaries, incentives, and total compensation for an additional 500 executive job titles (jobs that had previously been found only in the Executive Compensation Assessor) See UK/EU remuneration data in local currencies View positions within a selected industry in a benchmark table Review survey populations, alternate titles, and job codes Edit and rewrite job descriptions with a focus on skills Plan salary increases for multiple departments using the salary planning sheet RESEARch TOPIc: DATA keys AND QUIck calls Development of Online Assessor Series Every database has a key. Social Security uses Social Security numbers, and the IRS uses organizations EINs. ERI uses longitudes and latitudes for location, the abandoned US Dictionary of Occupational Titles (updated and enhanced) edot numbers for jobs, and esic codes (a combination of the abandoned US SIC and present tax-exempt NTEE codes) for industries. As ERI develops online versions of our Delphi PC Platform Library, we are generating universal data feeds that can be used by others, should their applications utilize ERI database keys. Have you ever thought of developing a web tool designed for your organization s internal use only? If you can envision it using the before-mentioned keys, then that s now possible. Call ext. 222 for more information; fees will vary as to application and frequency of data calls. Logically, we do not plan to provide data feeds that compete with our Assessor Series data. See for an example of what an ERI-provided application might look like. Large organizations internal use, however, is limited only by one s imagination. Quick calls via PAQ Services ERI is now providing PAQ with access to our survey databases (much as PAQ is offering ERI access to its edot Skills & Competencies database). This database access supports the provision of PAQ Quick Call reports where a third-party can be the researcher, which is often necessary for expert witness work. Basic Assessor reports begin at $189 per report (depending on selection criteria); more complex research is billed on a time and cost basis. The data accessed are unique, gathered under Patent Nos. 6,862,596 and 7,647,322. For individualized PAQ Quick Call reports, please call October Economic Research Institute Update

10 comparables ASSESSOR & TAX-EXEmPT SURvEy Basic (free) Edition Example Screens Review Pay Practices within +/- 1.0 Standard Deviation Rank and Search Source Organizations by Size, Alpha, etc. Analyze by Sector, Size, Location, and Job Function Select and Create Customized Comparable Peer Reports Access All Data > +/- 1.0 SD and Historic Forms Create a Trend Analysis for Any Organization Perform State-Specific Analyses esemantic Analysis for Text and Relationship Searches The IRS just renewed its 17 subscriptions for 2012 (subscribing since 2005)! Type in any organization, address, or individual s name and review where it occurs in public documents. October Economic Research Institute Update

11 NONPROfIT EXEcUTIvE compensation Tax-Exempt Executive Pay ERI s Nonprofit Comparables Assessor & Tax-Exempt Survey (CA) is an easy-to-use and up-to-date desktop program that converts executive compensation data, reported to the IRS on Forms 990, 990-EZ, and 990-PF, into almost infinite combinations of digitized analyses covering over 500,000 unique nonprofit organizations. It can assist in attracting, retaining, and motivating key management staff, paying competitively, controlling costs, and providing a rebuttable presumption for compliance with IRS regulations on reasonable compensation. Interactive graphs and screens present data on more than 25 million incumbents from over six million forms filed from 1998 to the present, all keyed to Internet-retrievable source documents. Data can be filtered and exported by industry, area, size, date, and tax status. CA is more a census than a survey. Two editions exist: the for salary planning and the Consultant Edition for board governance and in-depth research. CA is for compensation planning. These features are included: Search, rank, and sort by industry subsector, geographic area, date, and size (revenue or assets) Calculate average competitive compensation levels, along with user-selected ranges and percentiles, for more than 100 reported executive job titles and/or functions Provide benchmarks for compensation planning from the most recent publicly available data and/or data trended by the subscriber to any planning date Access source documents from the Library-990/PF/EZ tab Analyze Business Contractor as a position Export data to spreadsheets for further study Click on any dot and retrieve source documents CA+ is for in-depth research for consulting, board governance, IRC 4958 compliance, or litigation support. These features are included: All CA data and features Retrieve source documents with one click (on a graph point) from the most recently digitized Form 990 or SEC proxy data Access ERI Executive Compensation Assessor & Survey data, allowing the review of for-profit comparables from publicly traded entities Download historic data for all available organizations Use a Full Xwalk for tracing relationships among other available employer and compensation databases Sort by For Profit, Tax-Exempt, or both OccUPATIONAl ASSESSOR S OThER APPlIcATIONS Information for Disability Determinations The Occupational Assessor applications (online and PC) utilize ERI s PAQ edot Skills Project database, a constantly updating collection of selected characteristics of occupations previously published by the US government (discontinued in 1991/1993). In 2011, UNUM (the largest US private disability carrier) adopted edot as its initial and primary occupational information system. Much like the IRS use of ERI s Nonprofit ComparablesAssessor, the selection of ERI s data as a trusted and tried source validates our efforts and is the greatest recommendation yet received. free Job Search Edition Download the demonstration version of the OccupationalAssessor and receive the Job Search Edition. Answer the question, Within a 5-50 mile driving radius, what are the 20 organizations most likely in need of my skills and physical/mental capabilities? OA, assisted by the Internet, has an answer that greatly increases the chances of job search success. Designed for use by those with disabilities, but useful for all, there are over 10 million US employers with their address, phone, and contact person cited for over 18,000 jobs. October Economic Research Institute Update

12 EXEcUTIvE compensation ASSESSOR & SURvEy Profile Individual Jobs Direct Cash by Size Example Screens Review Compensation Details for Six Top Paid Jobs Create Customized Benchmark Listings Compare, Contrast, and Filter within Canada Analyze Financial Comparables (Highest Paid in Red) Compare, Contrast, and Filter within UK and EU Review Summary Compensation Tables Group and Analyze Only Selected Companies October Economic Research Institute Update

13 for-profit EXEcUTIvE compensation Executive Pay ERI s Executive Compensation Assessor & Survey (XA) software reports competitive salaries and bonuses for over 500 top management position titles as found within multiple industries. Executive compensation data may be adjusted for geographic area, industry, organization size, and compensation valuation date. The Executive Compensation Assessor software assists with precise evaluations of market pay and executive salaries, and is the only source of its kind that analyzes data compiled from all publicly available executive compensation sources. ERI s database includes US SEC proxy data and 10-K reports, plus Canadian information circulars and UK/EU annual reports. Two editions exist: the for US/Canada executive compensation planning and the Consultant Edition for use in Sarbanes Oxley compliance, litigation support, UK/EU analyses, and reasonable compensation disputes. XA is for compensation planning. It includes these features: Select a graph dot, and the actual Summary Compensation Table appears; click on the dot and download the source proxy, annual report, and 10-K materials via the Internet View compensation ranges, percentiles, and means/medians for over 500 position titles Adjust executive compensation data for geographic area, industry, organization size, pay strategy, and date Review companies between 1 million and 100 billion in size Establish trends based on compensation comparability data Examine base salary, incentive, and total remuneration data for an additional 1,534 Canadian publicly traded companies Click on any dot and retrieve source documents XA+ research has been used in federal tax courts since 1992; many describe it as the default source. It includes these features: All XA data and features View financial data and create appraisal averages or executive performance metrics for any group of comparable organizations Analyze base salary, incentive, and total remuneration data for an additional 1,514 UK/EU publicly traded corporations Utilize data from 1,123 unique industry sectors Review reliability statistics (standard error and number of incumbents) from non-redundant sources Access the Black-Scholes calculator or Valuations analyses View, edit, and rewrite full job descriptions RESEARch TOPIc: INDUSTRy DIffERENTIAlS There are 6,862 publicly traded, for-profit US corporations that report executive pay. Many of these organizations represent multiple industries and, when pay differences are segmented among 1,123 ERI industry groups (esic), the statistical reliability created by a small n creates large variances. The creation of the Nonprofit Comparables Assessor has changed this, as many organizations that are not thought of as nonprofits have filed for tax exemption, among the 1.6 million, not counting churches. Among the 35 million lines of digitized tax-exempt management pay data, ERI has a database where industry differentials can be studied in new ways (most of health care is tax-exempt, affecting 23% of the US economy). Industry differentials for an Executive Director with $100 million in revenue follow (from the July release): Religion Related Housing, Shelter Youth Development Medical Research 257, , , ,493 Arts, Culture Environmental Foreign Affairs Education 427, , , ,841 October Economic Research Institute Update

14 EXEcUTIvE compensation INDEX Total compensation for Top Executives on the Rise Again REDMOND, WA September 2011 Total compensation for the highest paid executives is up this quarter nearly 20% over this time last year. While this number suggests significant improvement over the last year, it should not be taken out of context. Executive compensation, as tracked by the ERI indices, had declined throughout 2010 and only started to reverse course in the last quarter of Comparing the year-over numbers, the growth this quarter is weaker than the numbers from the first quarter of ERI tracks executive compensation in a specifically selected sample of publicly-traded companies to identify current trends. Highlights from this quarter s analyses follow: From August 2010 to August 2011, Total Overall Compensation for the highest paid executive grew 19.7% to $17.9 million/year. Restricted Stock Awards increased 27.8%. Bonus/Incentives/Stock Awards increased 32% for the year. Company Revenues were up 8.3%. Executive compensation typically consists of several components: a fixed base salary, a variable bonus in cash and/or non-equity incentives based on meeting performance goals, and a variable equity payment in stock (either restricted stock awards or stock options) based on stock prices. Pension and other compensation components are added to the compensation package for these top executives. Compensation Components August 2010 August 2011 % Change Base Salary $1,173,708 $1,246, % Bonus & Non-Equity Incentives $3,055,875 $4,030, % Restricted Stock Awards (RSA) $4,699,897 $6,007, % Stock Options $4,018,262 $4,170, % Pension $1,543,604 $1,690, % All Other Compensation $482,851 $784, % Total Overall Compensation $14,974,197 $17,930, % Company Revenues (Millions) $57,056 $61, % Looking at the trends in changes of the various compensation components over time against changes in company revenue, we see that the timing of the changes differ by component. The graph at left below shows that company revenue actually decreased in the first part of Incentives showed a significant decrease before the decline in company revenues was observed, while base salary did not show a drop until after company revenues had reached their maximum rate of decline, which occurred in this quarter last year. At the same time, incentives were moving from a declining rate to positive growth. The result is that, while company revenues were declining, the rate of decline switched from accelerating to decelerating, and base salary changes and incentives were moving in opposite directions. This suggests an inflection point in company performances reflected both in actual revenue and executive compensation. Now, one year later, we see the opposite; incentives and base salary are still headed in different directions, but from a generally positive position to a negative, while the rate of company growth has stopped increasing. Although the growth this quarter appears strong year-over-year, the trends do not. year-over-year change by Quarter Trends of the compensation composition by year (%) Looking again at the composition of the Total Overall Compensation, we see that 77% of the increase was due to Bonuses and Non- Equity Incentives coupled with Restricted Stock Awards. While these are also currently the largest components, that has not always been the case. The graph at right above shows how the proportions of the various components have changed over time. We can clearly see that, prior to 2006, Stock Options and, to a lesser extent, Bonuses were a much larger component of Total Overall Compensation. Since 2006, Non-Equity Incentives and Restricted Stock Awards have become the components with the largest proportions. October Economic Research Institute Update

15 ERI JOB DEScRIPTION Salary Assessor Data manager s Task list (continued from page 1) Reviews the quality of job matches of imported data to jobs contained in ERI Assessor Series databases. Analyzes and incorporates digitized top-level management data from Form 990s, publicly traded SEC proxies and 10-Ks, Canadian information circulars (SEDAR), and UK/EU annual reports. Incorporates and blends database and survey extracts from leased survey datasets (e.g., GuideStar, etc.). Reviews homogeneous job data from over 20 leased national statistics offices (including US public domain OES data) to conclusively establish bottom rates (as the above tasks conclusively establish top rates); updates state minimum wages. Examines and incorporates data feeds from verified loan applications, disability determination applications, state and FLSA overtime analyses, PAQ field job analyses, and other employer-provided or approved data sources. Incorporates data from ERI Salary Surveys (146 US, 35 Canadian, and 23 UK reports), with survey participation doubling in Explores new sources of employer-provided market data on a recurring basis, including continual review of ERI s collection of over 50 percent of US job board postings (since July 2006) and employee-provided input (SalaryExpert since 2000), with the latter two sources not being used in Assessor Series job specific analytics (as error rates are too high). Examines market data in terms of reliability; many sources of market data have significant error when compared to the true market values due to inadequate survey job level definitions/design and survey participants errors in job matching, etc. Compiles market and available job characteristics from PAQ s edot Skills Project to assist in survey job matching. Updates OA constructs and databases as required (with UNUM adopting SA, GA, and OA as initial and primary sources in 2011). Writes SAS and C# code to analyze market data in terms of mean, median, starting and maximum salaries, and years of experience for various wage levels, as well as compensation by job level (beginning, intermediate, and senior). Writes SAS computer input screens for data entry when new job data requires keying. Analyzes data in terms of incentive compensation in addition to base compensation (and variable pay s affect thereon). Assigns job characteristics based on edot matches or, if not a confident edot match, semantically assigns edot SCOs. Updates and applies ERI proprietary market models that use job characteristics to calculate current market values; in turn, the calculated values are compared to survey values to identify where such values deviate from others and determine when a closer audit of market data may be needed (with a focus on skills, licenses, certifications, and required experience). Updates and applies ERI proprietary market models on job function to help audit the incentive compensation entered for each job, again verifying employer-provided data. Updates and applies ERI proprietary market models based on salary level, function, and job characteristic to audit the years of experience assigned to each maturity curve and assign industries; key to SA methodology is the maintenance of a polynomial maturity curve based over time (many positions reaching back to 1985). Analyzes relative value of a job to another (where some relationship exists between jobs and job families); compares historical data of past relationships to present day relationships (possible since relative pay values change slowly) and, where variations exists, audits current market data. Supervises staff of market data input and research analysts. Reviews and audits joint work of Assessor Series staff. Works with GA Data Research Manager on the impact of changes in geographic differentials; applies annual release of OES H1-B values and reviews census data and SCOs. Analyzes input from ERI s Global Salary Calculator (GSC) C3 Job Family Matrix for Assessor countries (GSC reports data for 192 countries based on prorated job family values). Reviews annual changes in ERI s esic industry differential research databases (unique for the US, Canada, and UK/EU); works with other Assessor Series Data Managers. Researches new jobs that might be added to the Assessor database (as indicated by ERI s Job Availability Log), as well as jobs that should be dropped from the database due to changing technology; uses ERI s daily Google data feeds. Studies relationships and changing standard deviations for employee-provided data collected by ERI (SalaryExpert) - not used in SA. Reviews job posting values (shown on SA graphs to illustrate historically high nature of these values). Examines purchased, traded, and publicly reported values, as well as competing firms reported values (although these are no longer inputted into ERI s unique databases). October Economic Research Institute Update

16 ERI SUBScRIPTION ORDER ShEET ERI s ASSESSOR SERIES & Surveys software databases (single annual subscriptions, updated quarterly, most recent data) ERI s Platform library ERIPl $ free Salary Assessor & Survey SA $ 889. $ Consultant Edition (with added executive/director titles and UK/EU data) SA+ $ 2,389. geographic Assessor & Pay Survey ga $ 889. $ Consultant Edition (with immigration/census/eeo-1 data and UK/EU data) ga+ $ 2,389. Relocation Assessor & col Survey RA $ 889. $ Consultant Edition (with 3,000 international cities and new labor cost model) RA+ $ 2,389. Executive compensation Assessor & Survey XA $ 2,289. $ Consultant Edition (with UK/EU data, US SEC, and valuation norms) XA+ $ 2,889. Nonprofit comparables Assessor & Tax-Exempt Survey ( dots <+/- 1.0 SD) ca Basic $ free (with historic data, for-profit data, and dots >+/- 1.0 SD) ca $ 889. $ Consultant Edition (with State Analysis and Full esemantic Xwalk) ca+ $ 2,389. Occupational Assessor & Survey edot Job Search Edition OA Basic $ free (FLSA and Archive DOT) OA $ 889. $ Consultant Edition (enhanced with disability determination analyses) OA+ $ 2,389. combined SERIES software databases (single annual subscriptions, updated quarterly, most recent data) full Assessor Series fas = SA, ga, RA, OA $ 2,667. $ Professional Assessor Series PAS = fas, XA, ca, OA+ $ 4,989. $ consultant Assessor Series cas = PAS, SA+, ga+, RA+, XA+, ca+, RAS $ 6,889. $ Remuneration Assessor Series RAS = SAuk/eu, gauk/eu, RA+, XAuk/eu 1,889. cloud (ONlINE) SUBScRIPTIONS (In beta testing, call ext. 222) citrix capabilities (ERI s Citrix includes 32 bit Windows 2003 Servers with Citrix XenApp 4.5 within a published server desktop) NETWORk SUBScRIPTIONS A separate license is required for each individual user Assessor Series Price $ X the # of users = $ OThER RESEARch PRODUcTS ERI Salary Surveys (Survey participation begins in October and continues through March) $ 2012 Salary Increase Survey $ 244. $122 with participation (Free for Assessor Series subscribers via the Platform Library - participation required) Distance learning center (Courses for those new to compensation at $ 0. free (fee for exams) Subtotal: $ For CA, DC, MO, and WA subscribers, add applicable sales tax: $ For Canadian subscribers, add applicable taxes: $ For all other international orders: Foreign duties/taxes are a subscriber s responsibility Total: $ Your Name: Title: Organization: Address: Tel: Fax: Credit Card Type: Credit Card #: Exp. Date: (Visa/American Express/Master Card) PurchaseOrderNumber(orCreditCardSignature): CSV: Prices good through 1/15/ th Avenue NE, Suite 100 Redmond, Washington USA tel fax info.eri@erieri.com US FEIN CAD HST/GST October Economic Research Institute Update