HR Salaries: Stuck in Neutral

Like most U.S. workers, HR professionals enjoyed limited gains in compensation during 2012.

By Joseph Coombs Dec 1, 2012
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1212cover.gifAnother year of subpar job creation effectively stunted any substantial growth in compensation during 2012. This trend is widespread among industries and job classifications, and it applies to most HR professionals’ paychecks as well.

Overall, median total cash compensation for HR positions rose an average of just 2.4 percent in 2012, according to the 2012 General Industry Human Resources Compensation Survey Report-U.S. by Towers Watson. Total cash compensation includes base salary combined with variable forms of compensation, such as bonuses and incentives.

Top HR executives with labor relations skills earned median total cash compensation of $299,100 in 2012, up $5,800 from 2011. Top HR executives without labor relations backgrounds earned an even bigger bump in pay. Their median total cash compensation was $254,000 this year, an increase of $20,100 from 2011, according to Towers Watson’s data.

Outside of the HR executive office, professional/technical recruiters earned median total cash compensation of $71,700 in 2012, up 10.3 percent from 2011. HR employees in the compensation and benefits generalist/multidiscipline job category earned median total cash compensation of $101,400 in 2012, an increase of 3.6 percent from 2011.

Many of the HR job levels in Towers Watson’s survey saw minimal change in median total cash compensation during 2012 compared with the previous year. For instance, the "professional master level" in benefits realized an average increase of 1.3 percent; the "professional specialist level" in recruitment withgeneralist/multidiscipline skills earned an average increase of just 0.1 percent; and the "senior manager level" for employee development/training with generalist/multidiscipline duties experienced an average decline of 2 percent in median total cash compensation.

A Different Tack

Given the lack of overall movement in paychecks, a new approach to compensation may be in play for U.S. employers, says Laura Sejen, global practice leader for rewards at Towers Watson in New York City.

"There is a growing body of evidence that there is more value in taking a total rewards approach to compensation," Sejen says.

Greater emphasis on short- and long-term incentives, health care and retirement plans, and career development should all be in play when employers prepare compensation packages for new or existing employees, Sejen explains.

The receipt of short-term incentives, including bonuses tied to performance, varied in 2012. For top talent management executives, 81.8 percent received short-term incentives in 2012, and 81.2 percent of top compensation and benefits executives earned them this year.

On the nonexecutive side of HR, 40.6 percent of recruiters for support/hourly staff earned short-term incentives this year, while 47 percent of professional/technical recruiters and 48.8 percent of labor relations HR professionals received these incentives in 2012.

One-time payouts have become popular for employers that cannot afford companywide salary bumps, says Donna Rogers, SPHR, owner of Springfield, Ill.-based Rogers HR Consulting.

"Base salary adjustments add to [companies’] bottom lines on an annual basis," she says. In contrast, a spot bonus "can be taken out of a pool of profits and it’s a one-time shot" in a precarious economy.

Other data reinforce the cost-control mode that has taken hold across the private sector. Employers projected an average salary increase of just 2.4 percent for all workers in 2012, according to a survey of 2,175 HR professionals for the Society for Human Resource Management’s 2012 Human Capital Benchmarking Study.

In general, many workers in HR and other fields are probably "losing money" right now on their salaries, based on difficult economic conditions and the fact that wage growth has been at a bare minimum, says Dan Ripberger, managing director of Cincinnati-based RSC Advisory Group.

Merit budget salaryincreases on a good day are running at 3 percent, Sejen says, and the limited gains in compensation are consistent across all groups and levels of employees.

That is not expected to change in the near future until stronger demand for employment returns. Overall, among companies planning to raise pay in 2013, the average increase will be 2.9 percent for salaried nonmanagement employees, according to a separate Towers Watson survey of officials at 857 companies across various industries. Similar raises for 2013 are planned for executives and nonexempt employees. This is mostly unchanged from the average 2.8 percent raise salaried nonmanagement employees received in 2012 and the 2.7 percent increase they received in 2011, according to Towers Watson.

"The economy is still fairly volatile," Sejen explains. "Three years past the end of the recession, companies continue to be very mindful of cost management. At the micro level, there is a continued softness in the talent market. There’s plenty of available talent, but it’s not necessarily people with critical skills or those who are top performers."

In-Demand Positions

Perhaps as a resultof the challenge in finding quality workers, HR professionals with a keen eye for the best talent are in high demand, Ripberger says.

In turn, knowing what to pay those top-tier workers has become a sought-after HR skill. Strategic/executive compensation experience and global business acumen are among the most attractive qualifications for HR professionals, Ripberger says.

"People who are particularly adept in broader talent management are in demand," he says. "It could be recruiting, but also being an effective auditor and assessor of talent. To some degree, employers have a little bit of luxury. There are more candidates on the market, and employers can be a little more selective."

But that doesn’t mean highly qualified individuals are missing out on good paychecks. "There are still plenty of opportunities," Ripberger says. "People are still changing jobs."

In the future, Rogers says, HR generalists could be in greater demand and therefore could command higher compensation. Many companies cut HR staff during the Great Recession and continue to operate with smaller HR departments, she says, adding, "if the company can’t afford more than one or two people, then a generalist makes sense."

In 2012, the "senior group manager level" of the HR generalist/consultant generalist/multidiscipline job category saw the third-highest percentage increase in median total cash compensation, at 34.4 percent, according to the Towers Watson data. People in these positions earned a median total cash compensation package of $257,700 in 2012.

The leaner corporate culture marks part of an ongoing trend not just for HR but for the entire labor force, says Peter Kennedy, principal at Washington, D.C.-based PRM Consulting Group.

Although the HR field is becoming "increasingly complex," companies need fewer and less-experienced personnel to manage much of HR’s operations due to growing use of technological tools, Kennedy says. Improvements in technology do not eliminate the need for HR staff, but they put downward pressure on wages for those jobs.

Self-service solutions proliferate online or on company intranets, he explains. Knowing that, an increasing number of employers are paying more for human resources information systems specialists, Kennedy says. One element of Towers Watson’s research backs up his claim: Median total cash compensation for the top human resources information systems executive category rose an average of $10,8000 in 2012 to $165,000, up from $154,200 in 2011.

Compensation and benefits expertise will be in demand for the near future, Kennedy predicts. "Because of the sensitivity of compensation information, it doesn’t reasonably lend itself to self-help solutions. You have to be savvy about statistics," he says. "With benefits, that’s also a very complex area, particularly because of the [Patient Protection and] Affordable Care Act."

Future Pay Trends

Many U.S. employers are actually doing well, despite current economic conditions. Corporate profits increased in the second quarter of 2012 by $21.8 billion, or 1.1 percent, according to the U.S. Bureau of Economic Analysis. Most of those companies, however, aren’t channeling funds to hire workers and boost salary budgets; instead, they are squeezing more production out of existing staff.

That could be a detriment for both employers and employees. Workers’ stress levels can rise in the short term. In the long term, employers could lose disgruntled employees when job opportunities emerge.

"When there’s less movement in jobs, there’s less focus on salary," Rogers says. "Any strategy that lowers the emphasis on salaries and hiring will eventually come back to bite some employers," she predicts.

Employers and employees are reporting that employees are working more hours, Sejen says. "That will continue over the next few years. We know that employees are taking less vacation time, too. Now, combine the employers’ reluctance to hire with not offering a lot in the way of merit increases or bonuses, and you’re in an environment of cost constraints."

These downward pressures on compensation have spread throughout industries and professions. That includes the HR profession as well.

Editor’s note: This article and an accompanying chart as originally published incorrectly reported the changes to total cash compensation for certain top HR executives. The changes were reported as percentages rather than as dollar figures. The article and chart have been corrected.

The author is a specialist with the Workplace Trends and Forecasting program at SHRM.

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