Southern Nevada Compensation & Benefits Association What’s New in Compensation and Benefits

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Southern Nevada Compensation & Benefits Association

What’s New in Compensation and Benefits

May 14, 2008

Patrick Shannon Nicole Jones-Gyllstrom

2© 2008 Mercer LLC. All rights reserved.

Topics

How is today’s economy impacting you?

What’s new in compensation?

What’s new in benefits?

Questions and Discussion


How is the economy impacting you?This recession is different

Globalization, technology, and outsourcing - The globalization of workforces, coupled with greater use of technology and outsourcing mitigates the need for drastic, across-the-board responses to the down turn.

Targeted strategies - Talent is at a premium; organizations are employing – and likely not going to abandon – creative, highly targeted strategies to recruit and retain the optimal workforce for long-term success.

Mindset change - There has been a mindset change; organizations realize that talent is their only sustainable form of competitive advantage. The typical recession only lasts 11 months.


How is the economy impacting you?Recent survey trends

60%

6%

34%

No changeExpandingMay freeze or downsize

Are you instituting staffing level changes?

Source: Mercer Snapshot Survey, 400 responses, March 2008.

Did you consider or institute budget changes in 2008?

85%

10%5%

No changeConsidering reductionHave reduced


How is the economy impacting you?HR initiatives

• 35% of organizations surveys reported they are considering developing new initiatives to retain high performers

• 28% indicated they are considering developing new or enhancing existing variable pay programs

• 21% have already instituted changes to improve sales force effectiveness

Source: Mercer Snapshot Survey, 400 responses, March 2008.


6



Continuing emphasis on total rewards

Strengthening of pay-for-performance

Increasing use of workforce segmentation


Rewards represent a downstream tool…Mercer’s Workforce Strategy Model


Three perspectives on total rewards…and costs are growing

Multiple perspectives are driving change

Rewards costs as a percentage of revenue are escalating


What total rewards levers do you have to pull?

Compensation

Base pay Guaranteed “bonuses” Short-term incentives Long-term incentives Financial allowances Financial recognition programs Deferred compensation

Development & Career

Performance management Learning and development Career opportunity and pathing Tuition reimbursement Mobility opportunities

Benefits

Retirement Savings and other wealth creation

programs Medical / Dental / Vision /

Prescription Drug, etc. Life insurance Short and long-term disability Accident coverage Job-related perquisites

Work Lifestyle

Time off Wellness programs Dependent care Workplace flexibility Commuter programs Workplace facilities and perquisites Experiential rewards Non-financial and status

recognition

You Are What You Reward


What rewards levers are other companies pulling?Areas for rewards investments over next 12 months

% of firms

Source: 2007 Mercer Total Rewards Snapshot survey of 583 firms across the US and Canada.


Some goals span groups: predictable income/benefits, having meaningful roles, opportunities for growth, being treated with dignity, and respect.

Career advancement opportunities

Further education outside

Being in an environment with other people from the same cohort

Developing a variety of skills and competencies (e.g., rotation)

Saving for a home

Balancing work and family/personal life

Flexible work hours

Career advancement opportunities

Saving for a child’s education

Planning for retirement

Saving for a child’s education

Planning for retirement

Dealing with the stress of balancing work and family/personal life

Taking care of an older parent

Planning for retirement/retiring

Having company- sponsored health care options available during retirement

Want to simultaneously support education, work, and leisure

Dependent care is an issue for about 1/3 of mature workers

Reduced physical demands

18-29

30-39

40-54

55+

Different goals by age group

Source: Mercer interviews

What rewards levers should you pull for what groups?One size does not fit all


What rewards levers should you pull for what groups?Workforce segmentation based on relative value creation

Performance drivers:employees who create

value for the organization

Performance enablers:employees who support

value creation

Legacy drivers:employees who

historically created value for the organization,

but no longer do

Attract, engage, retain Support business Retain institutional knowledge

Challenge:


Approximately 40% of organizations use career development, training opportunities and/or long-term incentive eligibility to differentiate rewards

Job Level (Excluding

Execs)Geographic

Location

Business Unit/Product

Line

Job Family (Excluding

Sales)Business Lifecycle

Base pay competitive positioning

64% 88% 67% 81% 83%

Short-term incentive opportunity (e.g., award targets and mix)

75% 37% 73% 66% 65%

Short-term incentive eligibility

62% 33% 61% 61% 60%

Career development/ management

41% 28% 43% 44% 57%

Training opportunities 35% 27% 42% 40% 51%

Long-term incentive eligibility

58% 19% 30% 32% 45%

Long-term incentive opportunity (e.g., award targets and mix)

54% 23% 32% 31% 45%

Health and welfare benefits 25% 50% 23% 23% 38%

Retirement benefits 24% 43% 22% 17% 40%

Source: Mercer’s 2007 Snapshot Survey “Measuring the Return on Total Rewards” (US & Canada)

How are other organizations segmenting their workforce?


15



Health care costs continue to outpace inflation

Employers continue to shifts costs to employees

Plan utilization may be falling

Consumerism and health management strategies

Other benefit trends


Cost growth has been flat since 2005Total health benefit cost change vs. workers’ earnings and general CPI

-1.1%

5.7%*

18.6%

16.7%

17.1%

12.1%

10.1%

8.0%

2.1% 2.5%

0.2%

6.1%

7.3%

11.2%

8.1%

14.7%

10.1%

7.5%

6.1% 6.1% 6.1%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Workers' earningsAnnual change in total health benefit cost per employee

Overall inflation

* ProjectedSource: Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) 1988-2007;Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April) 1988-2007.


Employee cost-shifting continues in 2007 among large employersPPO – average in-network deductibles

$473$426$413

$366$277 $291 $302

$343

$995$882

$833$765

$703$689

$1,022$1,134

2000 2001 2002 2003 2004 2005 2006 2007

IndividualFamily


Employee cost-shifting continues in 2007 among large employersHMO – average copay for physician visits

$17

$16

$15

$14

$12

$11$10

$16

2000 2001 2002 2003 2004 2005 2006 2007


Majority of employers planned to shift cost in 2008Large employers

40%36% 39%

Will raise employeecontribution percentage

Will raise deductibles,copays, or other cost-

sharing features

Will not shift cost


Slowdown in underlying trend suggests utilization may be fallingIncrease in cost predicted for upcoming plan year

10.0% 9.8%

9.0%

7.9%

6.6% 6.7%6.1%

5.7%

2005 2006 2007 2008

Before changes*

After changes*

* Includes changes in carrier, contribution strategy or plan design.


Employer cost management activities helping to slow increasesLarge employers

* in efforts to control health benefit cost or improve workforce health and productivity

52%

80% 20%

48%Consumerism

Healthmanagement

Source: Mercer’s National Survey of Employer-Sponsored Health Plans

Use strategy

Don’t use strategy

Use strategy and believe it has been successful*


Large employers Jumbo employers

Health website 78% 90%

Case management 76% 91%

Nurse advice line 67% 85%

Health risk assessment 56% 78%

End-of-life case management 42% 51%

Health advocate services 38% 47%

Targeted behavior modification 30% 51%

Use of specific health management programsLarge employers


Type of health information providedLarge employers

Tool to help select most appropriate plan

Information on health conditions

Individual provider quality

Individual provider cost

61%

30%

22%

21%


Increased somewhat

49%

Stayed about the same

21%

Decreased1%

Don't know20%

Increased significantly

9%

Employers see increased utilization of health informationAmong employers that provide health information


Strongly positive8%

Evenly mixed between positive

and negative32%

More negative than positive/Strongly

negative7%

More positive than negative

53%

Employee reaction to HSA-based CDHPLarge HSA sponsors characterize the response of employees enrolled in the plan


Make coverage available to PTEs: 62%

Average number of hours required for eligibility: 23/week

Of the employers covering PTEs:– 45% set different contributions for PTEs and FTEs– 6% offer different plans to PTEs and FTEs– 88% make coverage available to dependents

Average PTE contribution, as a % of premium – 38% for employee-only coverage– 45% for family coverage

Coverage for part-time employeesLarge employers with at least some PTEs


Same-sex domestic partner coverage on the rise, but strong regional variations persistLarge employers

29%

51%

20%

39%

16%

34%

62%

17%

51%

18%

All largeemployers

West Midwest Northeast South

20062007


Bariatric surgery coverage declined in 2007Large employers

49%

24%26%

54%

18%

28%

Covered, but membermust comply with

behavior modificationprogram/standards

Covered the same as anymedically necessary

procedure

Not covered

2006 2007


Chiropractic 85% 91%

Acupuncture/acupressure 33% 46%

Massage therapy 19% 15%

Homeopathy 12% 3%

Biofeedback 9% 9%

None 13% 8%

Alternative medicine therapies covered Offered to employees enrolled in primary medical plan

Jumbo employers

Large employers


Use of salary-based employee cost-sharing, by employer size

8%

13%

17%

22%

25%

500-999employees

1,000-4,999 5,000-9,999 10,000-19,999 20,000 or more


Clinic for occupational health services 31% 8%

Clinic for primary care services 14% 10%

Considering for 2008 or 2009

Currently provide

Provide onsite or near-site medical clinicsLarge employers


Voluntary Benefits on the Rise

Increased demand for voluntary benefits– Auto and home insurance– Legal– Identity Theft– Pet insurance– Critical illness– Long term care


Plan Types:

Voluntary

Employer funded base with voluntary buy-ups

Executive carve-out (employer funded)

Long Term Care Offerings Continue to Grow


Other Work Life Benefits

On site oil change

On site car wash

Dry cleaning pick up

Gym

Fitness classes

Health fairs

Discounts on products and services

Day care (onsite or stipend)

Flu shots


Total Rewards StrategyTying it all together

Personalized benefits communication – Help in achieving a positive ROI – Reinforce the company’s commitment to employees and their family– Improve morale and build stronger, more productive relationships with

employees


#1 Attraction and Retention Tool for EmployeesAfter health plan offerings

Work life balance!


Questions and Discussion

Patrick Shannon, PhD

[email protected]

Nicole Jones-Gyllstrom

[email protected]

Thank you!

mailto:[email protected]

www.mercer.com

Southern Nevada Compensation & Benefits Association What’s New in Compensation and Benefits

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