Competitive Pay: Paving the Way to Engagement

By Jennifer Blake

In case you haven’t noticed, we are no longer in a buyer’s market when it comes to attracting talent! The unemployment rate in the TN-MS-AR (MSA) as of September 2017 was 3.7%.i Now is the time to make sure your pay plan is competitive; before “now” would have been even better.

It’s true, pay isn’t everything. But when it comes to attracting talent in a tight labor market, competitive compensation is an essential underpinning for any employer. To ensure you’re salaries are competitive in your local labor pool, you need local salary data. Fortunately, the “2017 Memphis Area Wage Survey” is now available through the Greater Memphis Chamber, providing current pay rates for a number of jobs in a variety of industries.

Memphis Area Wage Survey

Background

The Memphis Area Wage Survey has been a source of local wage data for businesses since the 1980s. What started as a survey for the Memphis Manufacturing Council, evolved into an industry-wide resource as the industry mix in the Memphis area became more diversified.

In 2011, participation dropped off substantially as companies experienced the impact of the Great Recession. Local companies didn’t have a need for the wage and salary data as salaries were flat and employee turnover was low.

The Greater Memphis Chamber, however, was still executing its economic development initiatives. According to Adrienne Johnson, Vice President of Research at the Greater Memphis Chamber, local wage data is key information prospective businesses request when contemplating moving their businesses to the Memphis area. The Economic Development team at the Chamber have depended on the Memphis Area Wage Survey for this purpose since 1998.

It is no surprise, therefore, that the Chamber took the lead in resurrecting the Survey in 2017. Reaching out to other chambers of commerce and economic development groups in Shelby, DeSoto, and Crittendon counties, Adrienne and her team were able to attract 59 companies to participate in the 2017 Survey. In addition, the Chamber secured the funding to pay for the Survey’s production. Adrienne envisions repeating the Survey every two years, with the goal of increasing participation by 5-10% per year.

Methodology

The Chamber reached out to hundreds of companies in the greater Memphis region, inviting their voluntary participation. Participating companies provided wage and salary data for over 100 jobs and answered questions regarding pay practices and benefits. F&H Solutions Group collected participant data and produced Survey reports.

In keeping with U.S. Department of Justice guidelines, all participant data were reported anonymously so that specific wage data could not be traced back to any participant. Salary data were reported for a job only if we received data from at least five different companies, and if any one participant’s data represented at least 25% of all reported data for a particular job, we did not use that company’s data. We were able to report data on 77 unique jobs.

Survey Results

Participation

Manufacturing and distribution were the industries represented most often, with 39% of participants in manufacturing and 18.6% in distribution. The remaining industries represented were healthcare, education, government, banking, service, hospitality, and construction. The industries representing the largest numbers of employees were healthcare and government. Among the 59 participating employers, 14% reported having some union representation, and of those companies, unions represented an average of 64% of their employees.

Wages and Salaries

Participants reported actual and projected average merit increases for exempt and nonexempt jobs.

Table 1

Year

Exempt

Nonexempt

2016

3.1%

2.8%

2017

2.8%

2.8%

2018*

2.9%

2.9%

*Projected

These increases have become very familiar to employers since the recession, not just in the Memphis area, but all over the country. The “WorldatWork 2017-2018 Salary Budget Survey” reports salary budget increase trends nationally and across all industries. In 2007 and 2008, before the full effect of the Great Recession was felt by most companies, average salary budget increases were close to four percent. In 2009, average increases bottomed out at 2.1 percent and have continued to increase very slowly since. (See Graph 1.)

World@Work’s data for 2017 and 2018 is projected. When scoping the projected data by region, state, industry, or revenue we find very little variation. In comparison to the national salary increase projections, the average projected increases by Memphis companies are only slightly lower.

Benefits

In addition to providing information about wages and salaries, Survey participants answered several benefits-related questions. When it comes to time off, 64% of participants said they have a traditional vacation and time off policy, while 36% offer paid time off (PTO). The average number of days off available to new hires was ten for nonexempt employees and 12 for exempt. The average waiting period before using time off was 90 days. Other time off data is displayed in Table 3.

Table 3

Avg. # bereavement days (per incident)

3

Avg. # paid holidays per year

10

Avg. # sick days/year (non-PTO plans)

13

The most popular retirement plan is still the 401(k) plan, as 94% of participants offer a plan to employees and, among those employers, 93% provide matching contributions.

All participants provide employee healthcare. The average waiting period for new hires to enroll in coverage was 60 days. The average employee contribution toward monthly premiums ranged from 23% for individual coverage up to 28% for family coverage.

Comparing Jobs Internally and Externally

Some organizations rely solely on outside market data to assign value to their jobs. However, what happens to those unique jobs, for which there are no matches among the salary survey data? Having a consistent system for valuing jobs against one another internally facilitates the slotting of those unique jobs into the organization’s structure.

A common method of comparing jobs internally is some type of job evaluation process, where jobs are compared by reviewing factors such as knowledge, skills, and abilities. This process results in a job worth hierarchy for the organization, which provides a logical way of comparing jobs that are not necessarily alike. For example, on the surface we might agree a staff accountant, website administrator, and outside salesperson are quite different from each other. However, when evaluating jobs internally using a job evaluation plan, you might find these three jobs are valued about the same.

On the other hand, reliable survey data will help you understand the labor market from which you recruit employees and within which you hope to retain them. When you compare your company’s jobs to similar jobs in the outside market, you’re getting valuable information about current supply and demand. You might find the market value of your accountant is actually different from that of an outside salesperson, although internally you value you them the same. Therefore, employers need reliable salary data to ensure they have a true picture of what jobs are worth in the open market.

According to Christine Tande, of Tandehill Human Capital, using a hybrid approach (i.e., internal and external assessment) to valuing jobs is the most effective. Says Tande, “My approach is that both are tools and we need to put them in their proper places. You can use them both to perform checks on each other.”ii Indeed, when we look at jobs through more than one lenses, the complexity of the work becomes more apparent, giving us a more realistic picture.

Maintaining a fair and up-to-date pay plan is an essential building block for creating a great workplace. After all, if you can’t attract talent to your workplace because you’re out of step with the salary market, you’ll never get the opportunity to build a great workplace. But a discussion about employee compensation is not complete without acknowledging the fact that fair pay is only one, albeit important, satisfier that employees value when judging the workplace.

Employee Satisfaction

How do you leverage your company’s sound compensation program to move beyond an “okay” workplace to one that is “great”? Engagement, engagement, engagement!

Probably one reason we’ve heard so much about employee engagement in recent years is because it has been lacking in many workplaces. When employee disengagement becomes symptomatic, that is the time organizations scratch their heads and ask themselves, “What’s wrong”?

Generally, employees are happiest when they feel they’re using their hard-won skills to contribute to the organization in some meaningful way. One way employees know they’ve contributed something worthwhile is someone they respect actually thanks them. Great managers do this often. In fact, management can be the enabler of employee engagement. Great managers:

  • listen before doing
  • remove barriers
  • provide regular feedback
  • acknowledge employee contribution

There is an old adage that people leave managers, not jobs. Taken a step further, people leave jobs, not careers. Top leadership empowers managers and provides the tools that enable them to foster an environment where employees can expand their careers while having a sense of purpose and passion.

Paradoxically, one of the most frequent reasons employees give for resigning is pay. So which is it — pay, the manager, the culture? When a company knows its labor market and maintains a competitive compensation plan, they can be fairly confident employees aren’t leaving because of pay!

Jennifer Blake, CCP
Senior HR Consultant
F&H Solutions Group