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Expertise and sound judgement in handling recession-bred issues count when business leaders compensate their HR professionals.
As the recession persisted through 2009, top executives needed skilled HR professionals to implement furloughs, conduct layoffs and trim benefits costs—and all the while, to maintain employee morale.
To support their organizations, HR specialists went into high gear—doing more with fewer resources. While carrying out regular responsibilities, HR professionals have integral roles in reorganizations and reductions in force, “delivering the message or coaching managers to deliver the message of a layoff,” and often orchestrating the outplacement process, says executive recruiter Deborah Manning, SPHR, a member of the Society for Human Resource Management’s (SHRM) Staffing Management Special Expertise Panel.
While budgets declined and workloads increased during 2009, the value of HR expertise shot up: HR compensation held steady or increased even during a period when pay raises throughout the economy were slim, bonuses rare and jobs in jeopardy.
Compensation for human resource professionals increased an average of 3.2 percent in 2009, according to the 2009/2010 Survey Report on Human Resources Personnel Compensation conducted by Watson Wyatt Data Services, part of the Washington, D.C.-based consulting firm Watson Wyatt Worldwide, in collaboration with SHRM. That average rate of increase—in salary and total cash compensation—“is strong compared to overall trends,” says Jennifer C. Loftus, SPHR, national director at Astron Solutions, an HR consulting firm in New York City. She is a member of SHRM’s Total Rewards/Compensation and Benefits Special Expertise Panel.
Human resource professionals in the labor relations and legal function saw the highest average salary increase (3.4 percent) and the highest average total cash compensation increase (4.7 percent). Expertise in labor relations and legal matters, particularly with unions, proved to be in demand. Loftus offers the following explanation: Amid layoffs, furloughs and other HR-related cost-saving techniques, “compliance with the law during these delicate situations is essential.”
Assembling the Package
Compensation consists of base pay or salary and sometimes includes bonuses or variable pay. Variable pay enables companies to reward strong performers without the long-term increases in fixed costs that result from raising base pay. Types of variable pay include short-term incentives (STIs) and long-term incentives (LTIs).
STIs usually consist of cash given for immediate year-end results. LTIs—such as nonqualified stock options, incentive stock options or restricted stock—reflect performance for multiple years.
The size of cash bonuses depends on how well an organization has done. Despite the recession, this year’s number of HR positions receiving STI payouts exceeded the number in 2008. “In some ways, HR pay reflects the general trend to move away from base salary increases and toward the more flexible STIs,” says Michael Murphy, SPHR, compensation and benefits director at Shoe Carnival Inc., a multi-state footwear retailer based in Evansville, Ind., and a member of SHRM’s total rewards panel.
Among the 15 top HR executive positions surveyed each year, the percentage receiving STIs in 2009 was up in eight categories—double the number that rose in 2008.
“This great turnaround” means HR executives are in demand in these difficult times and the economy is showing signs of improvement, says Tom Wimer, president of Knowledge Bank LLC, an HR consulting firm in McLean, Va.
The greatest jump in STIs for top HR positions was the increase of 35 percentage points—to 67 percent—for the position of corporate compensation and benefits executive; the largest falloff was for corporate compensation executives, at 61 percent, down eight points from 2008.
The figures suggest that in a difficult economy, there was great demand for executives who could oversee a combination of functional areas, enabling employers to pay for just one executive to oversee more than one HR function. Moreover, there is demand for the diminishing supply of seasoned executives who can oversee both compensation and benefits, says Bob Cartwright, SPHR, president and CEO of Intelligent Compensation LLC, an HR consulting firm in Pflugerville, Texas. He is also a member of SHRM’s total rewards panel.
In more than half of the 25 HR manager positions examined for this article, there were increases in the percentage of those receiving STIs during 2009. For example, 77 percent of HR planning managers received STIs, up 28 percentage points from the year before. This increase, experts say, reflects the need to align HR solutions to business strategy so that HR professionals can provide more detail about an organization’s human capital.
Not surprisingly, such information was much in demand during 2009, when organizations looked to HR professionals to help them decide where to reduce human capital costs. In addition, HR planning managers often assess current and future skills gaps so they can best develop skills necessary for future business. “CEOs and executive leadership in many organizations today are demanding better results from human resources in acquiring viable and skilled talent,” Cartwright says.
Other positions that saw percentage increases in recipients of STIs were employee relocation manager and employment and recruiting manager—each an area that can reduce costs.
Consultant Loftus says she was surprised, however, by the 13 percentage point decline in the share of employee training managers receiving STIs in 2009. “When times are tough,” she says, “providing additional training and development is an effective way to make one’s workforce more productive, nimble and efficient, while at the same time rewarding employees without adding base pay costs.”
Skills in Demand
Salary increases this year seem to reflect the relative importance of particular HR positions in a difficult economy. For 2009, high percentage gains in median total cash compensation—base salary and cash bonuses minus noncash incentives such as stock options—went to top HR executives in five specialties who could help their organizations reduce human capital costs while keeping productivity high: top international human resources executive, up 33 percent; top division or subsidiary HR executive with labor relations responsibilities, up 23 percent; top division or subsidiary HR executive without labor relations, 16 percent; top HR executive with labor relations, 15 percent; and top HR executive without labor relations, 15 percent.
Five of the 20 HR positions with the highest percentage increases in median total cash compensation were in compensation or benefits, suggesting that business leaders found it important to reward HR skills that could contribute to cost reduction or containment.
Benefits professionals have had to develop strategies to help companies be fiscally conservative while maintaining employees’ key benefits. Some examples include reducing health care benefits, temporarily curtailing retirement account contributions, and re-evaluating severance packages while still showing support and concern for their organizations’ human capital.
Lane Transou, SPHR, manager of benefits and compensation at Parker Drilling in Houston, says: “The bar is being raised for the HR professional. Managing human capital costs in difficult times requires a combination of skills that can deliver on the business objectives and at the same time address the emotional impact these changes have on employees and their families.”
Organizations need professionals skilled in benefits management and in controlling the escalation of benefits costs.
“Taking a firmer stand on employee health and containing health care costs is a smart move for organizations,” Transou says. “It accomplishes two things: [It] makes employees take more responsibility for their personal health, and [it] frees up company dollars that can be reallocated to bonuses and other performance-based incentives.”
Training and development should be another HR specialty in high demand, Loftus says. “Strategic organizations take a total rewards perspective toward compensating employees. Training and development is one of the five key elements of total rewards. In times when salary budgets are tight and incentive payouts may not be possible, training and development remains a viable option for rewarding employees while at the same time generating a positive bottom-line impact.”
Lows and Highs
Some of the most prevalent human resource positions—HR assistant, HR generalist, compensation analyst and employee training specialist—posted median total cash compensation gains of only 1 percent to 2 percent in 2009. Employee benefits planning analysts and professional and technical staff recruiters saw increases of 3 percent and 4 percent, respectively; HR managers and compensation supervisors received 7 percent increases on average. Those positions fared well at a time when merit increases across all industries averaged 1.9 percent, according to the SHRM Human Capital Benchmarking Database.
At the other end of the salary spectrum—the 10 highest-paid top HR executives—median total cash compensation increases in 2009 ranged from 3 percent to 33 percent.
The top employment and recruiting executive’s compensation rose 3 percent to $150,300, and there were 15 percent increases for the top HR executive without labor relations responsibilities, to $189,000, and the top HR executive with labor relations, to $254,000—the highest compensation on the list. In second place, however, at $242,400, was the position of top international HR executive, whose compensation shot up 33 percent.
Says Loftus: “More organizations are looking to diversify in an attempt to minimize their risk of loss. Offshoring, onshoring and global expansion are several ways to achieve this goal. HR plays a key role in ensuring the success of any international venture.” Among 11 select HR managers in the survey, the international category saw the biggest gain—a 12 percent increase that raised median total cash compensation to $115,600, second only to the $128,800 for the post of executive compensation manager, whose compensation rose 5 percent from its 2008 level.
Plant human resources managers with labor relations responsibilities and human resources managers both saw 7 percent increases, to $94,800 and $90,000, respectively. Employee training managers and compensation managers each had a 1 percent decrease in median total cash compensation in 2009, indicating that these areas were simply not considered as crucial during a tough economic year.
Although that slight decrease is consistent with the decline in STIs for employee training managers this past year, experts caution that in some instances compensation declines may simply reflect staffing anomalies at some respondents’ companies, rather than trends.
As this year’s salary survey shows, human resource professionals who could offer seasoned expertise and judgment in difficult times were in demand and were compensated accordingly. This trend is likely to continue as companies look to HR to help them become better positioned for recovery and growth in a post-recession economy.
Looking ahead, as organizations emerge from the recession, some of the cost-cutting changes affecting human capital—hiring freezes, benefits reductions, layoffs—will likely give way to initiatives requiring HR specialists with skills in international issues, compensation, benefits and planning.
John Dooney is manager of strategic research at SHRM. Evren Esen is manager of SHRM’s Survey Research Center.
Online sidebar: The Data—Sliced and Diced
SHRM web page: Compensation Data Center
SHRM web page: Leading Indicators of National Employment
SHRM article: Salaries Looking Up (HR Magazine)
Charts and Graphs
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