Getting payback from pay February 2011

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One day event including two meals and networking opportunity for compensation & benefits professionals in the GTA, held near Pearson Airport in Toronto.

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Getting payback from pay February 2011

  1. 1. Getting payback from pay<br />by Toronto Training and HR <br />February 2011<br />
  2. 2. Contents<br /> 3-4 Introduction to Toronto Training and HR<br /> 5-6 In the beginning<br />7-8 Drill A<br />9-20 What should we be paying…?<br />21-26 Case studies A-C<br />27-28 Pay strategy<br />29-39 Executive pay<br /> 40-42 Changing incentive schemes for senior executives<br /> 43-44 Drill B<br /> 45-46 Graduate salaries<br />47-48 Expatriates; year-end planning<br />49-50 Performance-related pay<br />51-53 Variable pay<br />54-56 Effective and fair bonus schemes<br />57-59 What does the future hold?<br />60-65 Case studies D-F<br />66-67 Conclusion and questions<br />Page 2<br />
  3. 3. Page 3<br />Introduction<br />
  4. 4. Page 4<br />Introduction to Toronto Training and HR<br />Toronto Training and HRis a specialist training and human resources consultancy headed by Timothy Holden <br />10 years in banking<br />10 years in training and human resources<br />Freelance practitioner since 2006<br />The core services provided by Toronto Training and HR are:<br /><ul><li>Training course design
  5. 5. Training course delivery</li></ul>- Reducing costs<br /><ul><li>Saving time
  6. 6. Improving employee engagement & morale
  7. 7. Services for job seekers</li></li></ul><li>Page 5<br />In the beginning…<br />
  8. 8. Page 6<br />In the beginning…<br />Extrinsic and intrinsic rewards<br />Objectives<br />Direct v indirect reward <br />
  9. 9. Page 7<br />Drill A<br />
  10. 10. Page 8<br />Drill A<br />
  11. 11. Page 9<br />What should we be paying…design professionals?<br />
  12. 12. Page 10<br />What should we be paying…design professionals?<br />FIFTIETH PERCENTILE<br />Solo Designer $52,000<br />Owner/Partner/Principal $95,000<br />Creative/design director $91,000 <br />Art director $70,000 <br />Senior designer $61,500<br />Designer $45,000<br />Entry-level designer $36,000<br />Print production manager $60,000<br />Web designer $55,000<br />Copywriter $60,000<br />
  13. 13. Page 11<br />What should we be paying…EHS professionals?<br />
  14. 14. Page 12<br />What should we be paying…EHS professionals?<br />Overall $100,000<br />President or higher $150,000<br />Vice president $147,500<br />Director $120,000<br />Manager $92,000<br />Engineer $92,000<br />Specialist $79,250<br />Coordinator $74,000<br />
  15. 15. Page 13<br />What should we be paying…Project Managers?<br />
  16. 16. Page 14<br />What should we be paying…Project Managers?<br />Resources (Agriculture, Mining, etc.) $120,000<br />Consulting $116,000<br />Pharmaceuticals $110,000<br />Engineering $106,000<br />Aerospace $105,000<br />Government $104,832<br />Food and beverage $102,000<br />Utility $102,000<br />IT $100,422<br />
  17. 17. Page 15<br />What should we be paying…experienced IT experts?<br />
  18. 18. Page 16<br />What should we be paying…experienced IT experts?<br />Chief Technology Officer $111,750 - $174,250<br />Information Technology Manager $88,250 - $127,000 <br />Developer/Programmer Analyst $57,750 – $102,250<br />Lead Applications Developer $85,000 – $117,500 <br />Software Engineer $73,500 – $112,000 <br />Systems Administrator $53,250 – $83,000 <br />Database Manager $90,000 – $122,500 <br />Senior Web Developer $58,000 – $94,250 <br />Network Engineer $71,000 – $101,750 <br />Project Manager/Senior Consultant $81,500 – $117,000 <br />Systems Security Administrator $81,500 – $112,500 <br />
  19. 19. Page 17<br />What should we be paying…healthcare professionals involved in operating theatres?<br />
  20. 20. Page 18<br />What should we be paying…healthcare professionals involved in operating theatres?<br />Overall $73,310<br />Surgical services director/manager $86,543<br />OR director/manager $80,657<br />Clinical director/coordinator $89,800<br />OR supervisor $71,667<br />OR business/financial manager $83,708<br />OR materials manager/coordinator $55,667<br />Surgical instruments manager $52,667<br />Other $65,667<br />
  21. 21. Page 19<br />What should we be paying…healthcare professionals involved in infection control & prevention?<br />
  22. 22. Page 20<br />What should we be paying…healthcare professionals involved in infection control & prevention?<br />Microbiologist $57,500<br />Infection Preventionist $68,381<br />Infection Control Practitioner $65,203<br />Infection Control Nurse $57,151<br />IC Manager $79,031<br />IC Director $78,714<br />IC Coordinator $67,575<br />Epidemiologist $80,833<br />Educator $67,500<br />
  23. 23. Page 21<br />Case study A<br />
  24. 24. Page 22<br />Case study A<br />
  25. 25. Page 23<br />Case study B<br />
  26. 26. Page 24<br />Case study B<br />
  27. 27. Page 25<br />Case study C<br />
  28. 28. Page 26<br />Case study C<br />
  29. 29. Page 27<br />Pay strategy<br />
  30. 30. Page 28<br />Pay strategy<br />THREE BASIC FACTORS<br />Compensation<br />Perks<br />Happy & healthy working environment<br />
  31. 31. Page 29<br />Executive pay<br />
  32. 32. Page 30<br />Executive pay 1 of 10<br />FLAWS IN CURRENT PACKAGES<br />The nature of awards and excessive leveraging.<br />Lack of discipline in setting targets and assessing performance.<br />Failure of incentive plans to match timing of payments with risk realization.<br />Failure to integrate risk into incentive plans.<br />
  33. 33. Page 31<br />Executive pay 2 of 10<br />FINANCIAL STABILITY FORUM PRINCIPLES<br />The board must actively oversee the compensation system’s design and operation.<br />The board must monitor and review the compensation system to ensure it operates as intended.<br />Employees engaged in financial and risk control must be independent, have appropriate authority and be compensated in a manner that is independent of the business areas they oversee and commensurate with their key role in the firm.<br />
  34. 34. Page 32<br />Executive pay 3 of 10<br />FINANCIAL STABILITY FORUM PRINCIPLES<br />Compensation must be adjusted for all types of risk.<br />Compensation outcomes must be symmetric with risk outcomes.<br />Compensation pay-out schedules must be sensitive to the time horizon of risks-mix of cash, equity and other forms of compensation must be consistent with risk alignment.<br />
  35. 35. Page 33<br />Executive pay 4 of 10<br />FINANCIAL STABILITY FORUM PRINCIPLES<br />Supervisory review of compensation practices must be rigorous and sustained, and deficiencies must be addressed promptly with supervisory action.<br />Firms must disclose clear, comprehensive and timely information about their compensation practices to facilitate constructive engagement by all stakeholders.<br />
  36. 36. Page 34<br />Executive pay 5 of 10<br />DRAWBACKS WITH CLAWBACKS<br />A clawback does not encourage prudent performance. It punishes after the fact, which, perversely, can increase business risk by deterring disclosure, a situation that might result in the application of the clawback.<br />Expanding the clawback to deal with excessive risk taking is difficult because the focus needs to be on risk-taking behaviour rather than on an occasional poor result.<br />
  37. 37. Page 35<br />Executive pay 6 of 10<br />DRAWBACKS WITH CLAWBACKS<br />A clawback forces the company to recover funds from the employee, which is legally and practically difficult. Courts are unlikely to enforce clawbacks unless they are clear and<br />unambiguous. Moreover, the company will need to incur legal and other costs to recover incentive amounts, and the employee may no longer have the funds to repay the amount.<br />Dealing properly with taxation of a clawed-back bonus is complex.<br />
  38. 38. Page 36<br />Executive pay 7 of 10<br />SYNCHRONIZING THE TIMING OF PAYMENT & RISK REALIZATION<br />Payment of incentives based on results net of realized risks, with payment deferred until the associated risks have been realized. This provides for an integrated result and risk-based incentive.<br />Payment of incentives based on results, with payment held in escrow until the end of the risk realization period. However, it can be complex to assess the effect and quantum risk and properly define the risk-realization period.<br />
  39. 39. Page 37<br />Executive pay 8 of 10<br />SYNCHRONIZING THE TIMING OF PAYMENT & RISK REALIZATION<br />Payment of incentives in the form of share-based compensation, with the shares held in escrow until the end of the risk-realization period. This allows share price to be a proxy for the real cost of realized risk, which can materially simplify the plan.<br />
  40. 40. Page 38<br />Executive pay 9 of 10<br />RESPONSIBILITIES OF THE COMPENSATION COMMITTEE<br />Establishing plan terms, set up and targets.<br />Assessing expected pay-out levels.<br />Monitoring performance against expectations and financial realities.<br />Correcting errors.<br />Having the courage to exercise discretion in both directions (increase payments when a plan does not generate a payment in deserved circumstances and decrease payments when the plan terms provide for overpayment). <br />
  41. 41. Page 39<br />Executive pay 10 of 10<br />RESPONSIBILITIES OF THE COMPENSATION COMMITTEE<br />Allowing discretion requires real trust between the board and the executives, because the flexibility must be in the plan, and with it comes the risk that the board may reduce compensation even when targets are met.<br />
  42. 42. Page 40<br />Changing incentive schemes for senior executives<br />
  43. 43. Page 41<br />Changing incentive schemes for senior executives 1 of 2<br />Introduce new financial measure(s)<br />Introduce new non-financial measure(s)<br />Introduce new relative measures <br />Increase funding pools<br />Decrease funding pools<br />Add a maximum funding cap, if one does not exist Increase range of performance for corresponding pay-out levels<br />Decrease range of performance for corresponding pay-out levels <br />
  44. 44. Page 42<br />Changing incentive schemes for senior executives 2 of 2<br />Allow for increased discretion related to pay-outs Allow for decreased discretion related to pay-outs Increase threshold pay-out opportunity <br />Decrease threshold pay-out opportunity <br />Increase maximum pay-out opportunity<br />Decrease maximum pay-out opportunity <br />Provide for mandatory pay-out of all or portion of<br />award in share/share units<br />
  45. 45. Page 43<br />Drill B <br />
  46. 46. Page 44<br />Drill B<br />
  47. 47. Page 45<br />Graduate salaries<br />
  48. 48. Page 46<br />Graduate salaries<br />Educational Services $33,883<br />Retail/Wholesale Trade $41,805<br />Government (Federal) $46,874<br />Financial Services $49,218<br />Accounting Services $50,371<br />Consulting Services $55,148<br />Engineering Services $56,070<br />Banking (Investment) $60,806<br />Petroleum & Coal Products $67,630<br />Healthcare Services (For Profit) $73,728<br />
  49. 49. Page 47<br />Expatriates; year-end planning<br />
  50. 50. Page 48<br />Expatriates; year-end planning<br />Determination of expatriate compensation<br />contacts (stakeholders) <br />Set deadlines <br />Collection tools<br />Determination of expatriate population<br />Reporting<br />
  51. 51. Page 49<br />Performance-related pay<br />
  52. 52. Page 50<br />Performance-related pay<br />FACTORS CONTRIBUTING TO AN EFFECTIVE PAY FOR PERFORMANCE CULTURELeadership support<br />Processes for differentiating performance processes for delivering pay to high performers <br />REASONS FOR HAVING AN INEFFECTIVE PAY FOR HAVING AN INEFFECTIVE PAY FOR PERFOMANCE CULTURE<br />Limited compensation budget <br />Inability for leaders and managers to deliver feedback<br />Lack of leadership support<br />
  53. 53. Page 51<br />Variable pay<br />
  54. 54. Page 52<br />Variable pay 1 of 2<br />DRIVERS OF CHANGE<br />Better alignment with business strategy<br />Improve company or team performance<br />Create better alignment or line of sight between corporate and individual performance<br />Ensure market competitiveness<br />Reinforce specific business priorities<br />Improve individual performance<br />Improve employee engagement<br />
  55. 55. Page 53<br />Variable pay 2 of 2<br />DRIVERS OF CHANGE<br />Ensure retention<br />Better balance of fixed and variable costs<br />Ease with which the program can be communicated and understood<br />Satisfy external stakeholders demands (investors, media, community) <br />Comply with regulations or governance requirements <br />Reduce risk<br />
  56. 56. Page 54<br />Effective and fair bonus schemes<br />
  57. 57. Page 55<br />Effective and fair bonus schemes 1 of 2<br />Eligibility<br />Plan philosophy<br />Performance measures<br />Line of sight<br />Calculation<br />Threshold<br />
  58. 58. Page 56<br />Effective and fair bonus schemes 2 of 2<br />Payment calculation<br />Percentage of salary<br />Fixed amount<br />To base bonus on a predetermined bonus pool formula<br />Timing<br />Dos<br />Don’ts<br />
  59. 59. Page 57<br />What does the future hold?<br />
  60. 60. Page 58<br />What does the future hold? 1 of 2<br />The dampening impact on salaries caused by the 2009 economic crisis is subsiding. <br />Most employers are expecting to be in a position to afford more aggressive salary increases than they have implemented in recent years; though not to the same levels as experienced before the economic downturn. <br />
  61. 61. Page 59<br />What does the future hold? 2 of 2<br />Most employers are deciding it is important to reward employees with more substantial salary increases in 2011. <br />There will be more salary increase dollars available in 2011 to reward and retain top performers. <br />Assuming the economy continues to demonstrate recovery, given the upward momentum highlighted in the survey results so far, it is likely that actual salary increase budgets implemented in 2011 will exceed these preliminary levels.<br />
  62. 62. Page 60<br />Case study D<br />
  63. 63. Page 61<br />Case study D<br />
  64. 64. Page 62<br />Case study E<br />
  65. 65. Page 63<br />Case study E<br />Canada’s top 100 CEOs<br />
  66. 66. Page 64<br />Case study F<br />
  67. 67. Page 65<br />Case study F<br />
  68. 68. Page 66<br />Conclusion & Questions<br />
  69. 69. Page 67<br />Conclusion<br />Summary<br />Questions<br />

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