Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, August 14, 1994 TAG: 9408130011
SECTION: BUSINESS PAGE: F3 EDITION: METRO
SOURCE: EDWARD IWATA ORANGE COUNTY REGISTER
DATELINE: LENGTH: Long
Call it The Incredible Shrinking Raise.
As companies keep slicing and dicing costs, experts say the average working stiff gets smaller and smaller raises - down to 3 percent to 4 percent a year, barely above cost-of-living increases.
In earlier years, workers typically earned wage increases of 5 percent to 10 percent.
``Merit budgets [for wage increases] are really dropping as organizations get much flatter,'' said Larry Wangler, a principal with Towers Perrin in Irvine, Calif.
To keep profits up and their wage slaves happy, companies are getting creative with a broader range of compensation and benefits.
Instead of fat raises, employers are offering performance-incentive bonuses, stock plans and health and pension benefits.
``Everyone is looking for innovative ways to reward employees,'' said Steve Feltz, a consultant at William Mercer Inc. and the American Compensation Association in Scottsdale, Ariz. ``Organizations are linking employees' bonuses to the fortunes of the company.''
So how can employees squeeze the best compensation packages out of their bosses? And how can companies best structure those packages?
Whether you're an executive, a middle manager or an entry-level worker, here's some advice to keep in mind when negotiating or putting together a salary and benefits package:
Educate yourself about compensation topics. If you think a cafeteria plan is your company's lunch menu, you're in trouble.
Get information from your employer's personnel or human resources office. Skim through the many books and magazines on business, personal finance and career issues. Talk to savvy managers or consultants who know the ins and outs of wages and benefits.
Quarterly and year-end bonus plans pegged to higher performance are all the rage.
Many organizations are using gain-sharing and profit-sharing plans, which give bonuses to groups or individuals based on productivity gains.
Under such programs, low-level employees might see 10 percent to 15 percent bonuses; midlevel managers, 10 percent to 20 percent; senior managers, 20 percent to 60 percent; and top executives, 40 percent to 200 percent.
For corporate executives, however, impatient shareholders and proxy and accounting rules have led to pay and stock options linked to the company's bottom line.
``More than ever before, executives must justify their compensation by performing,'' said John Andrew Miller, a Newport Beach, Calif., attorney who specializes in executive contracts.
For incentive programs to succeed, their performance goals must be clear, measurable and achievable, Feltz said.
Feltz and Wangler said the strongest incentive programs measure the financial and operating results of a department or company.
Financial performance may be measured by sales and profits, return on equity or assets, total costs per unit and other data.
Operating results could be gauged by improved productivity, customer satisfaction, product quality, smoother internal operations and other measurements, Wangler said.
A big key is educating employees about the company's finances and operations, the experts noted. If workers understand their roles and how their employer makes a buck, they're more motivated to improve their performance.
Or, as compensation expert John Rubino of Ernst & Young says, ``You need to tell them and sell them'' on the whole package.
Benefits are a huge part of total compensation because of rising health care and insurance costs.
Compensation managers talk about ``total remuneration'' packages that might include disappointing base salaries but handsome benefits.
Flexible-benefit plans, known as cafeteria plans, continue to grow in popularity, the consultants said.
Under the plans, employees can choose from a wide range of benefits, including health, life and auto insurance, disability and accidental death benefits, vacation days and retirement plans such as 401(k)s.
The cafeteria plans give workers more nontaxable benefits under Internal Revenue Service codes. Employees also have much more flexibility to adapt the benefits to their ages, income levels, lifestyles and family circumstances.
Because of the rocky economy and downsizing, more employers are willing to stretch health benefits from three months to two years for fired managers and executives, Miller said.
Another popular offering is portable life or disability policies. Under these benefits, a manager can take the benefits with him if he is laid off.
If you're an employee, be realistic about the chilly business and job-search climate.
Even if you're a valued, successful professional, don't overplay your hand and expect an employer to meet all of your requests.
``It's still a buyer's market, so employees don't have much negotiating power or leverage,'' Wangler said.
The bleak landscape for hiring is making employees hunker down and stay at their jobs, Wangler added.
``Employees are very cautious, very conservative, in making moves to greener pastures,'' he said. ``There are a lot of frustrated people out there who want to move, but can't because of the economy.''
Management and labor must compromise and work together to improve performance, productivity and profits. This will lead to better wages and benefits for all.
``It has to be a collaborative effort,'' Feltz said.
by CNB