Compensation and Benefit 2018 Trends Worth Watching

Compensation Resources, Inc.

As we close out the year, the question arises what we can expect for 2018? Interestingly, the potential regulations that will likely change or go into effect, are coming from Washington, but not necessarily new regulations, but in many instances they are modifications of old rules, and many of these are “hidden” within the potential Tax Reform Regulations.

Some of the important trends affecting Human Resources and Compensation and Benefits, are as follows:

1.    Changes in the HR function: The HR function in larger companies continues to expand and has grown in importance, as its role encompasses more responsibilities, while the HR function in medium and smaller organizations has actually stayed pretty much the same or in some cases, has actually truncated. In larger organizations, HR has gotten a “seat at the management table”, and the recognition that it actually has control over the labor force, the largest expenditure within many companies. In smaller companies, the HR function is typically strapped for people and resources necessary to get the jobs done, and takes on a less defined role.

2.    Workplace Wellness Programs: Contrary to general belief, the benefit of wellness programs far outweighs the costs of those programs. In addition to the health aspects, they provide a strong sense of team unity among employees, and provide increased job satisfaction. Under the general heading of “wellness” are health and welfare programs, as well as those that provide retirement planning and other money management areas to assist employees to better understand and make appropriate decisions on financial issues.

3.    Student Loan Assistance – One of the most significant financial issues, that affects primarily the younger employees are student loans, which are currently valued at $1.3 Trillion. From the companies’ perspective, the fear is that the ex-students are repaying their debt with funds that should be put aside into 401(k) and 403(b) retirement accounts, thereby adding a huge and unwelcome level of anxiety to them, as well as their future retirement planning. Companies that adopt some form of relief, possibly tied to the employees’ length of service and performance, or company financials, may have a distinct advantage over their competitors.

4.    The Impact of Regulations on Compensation and Benefit Matters – There is considerable uncertainty with respect to executive compensation matters, tied to the recently released House and Senate tax reform bills. The House Bill threatens to eliminate deductions for performance-related compensation in public companies, place an excise tax on executive compensation in not-for-profits, and basically eliminate deferred compensation. On the other hand, a number of states and cities have recently enacted or are discussing potential increases to minimum wages; all of these issues could require significant restructuring of companies’ compensation programs. For benefits, the possible elimination or drastic modifications to the Affordable Care Act (ACA) or Obamacare will continue to shake up the health insurance marketplace. Our advice is the need to be aware of what’s happening both nationally and locally, so you and your company are not caught by surprise.

5.    Inclusive Perquisites – The definition of perquisites used to be inexpensive, but well-received extra benefits that were generally reserved for upper management; however, the definition has changed as companies strive to recruit and retain lower level, quality talent. Expense is always a consideration; nevertheless, creative and low cost perks with high intrinsic value can be made available to all employees, since the cost can be fairly minimal compared with the value of a content workforce. Some of the most distinct perks include transportation allowances, parking passes, training and educational programs, massage therapy, team-building exercises, health clubs, discounted child care programs, as well as extra vacation or time off.

6.    Salary Increases – As most companies have noted, salary increases have been moving upward at a lethargic pace. Specifically, salaries increased by an average of 3.0% in 2016, while 2017 appears to be on target for a 3.1% average increase. WorldatWork projects this pace will continue to grow slightly to 3.2% for 2018. The question is why salary budgets are moving so sluggishly, even though unemployment is the lowest it’s been in the last decade and there has been modest inflation. One major reason is that automation has finally caught up with many manufacturing companies which have been installing robotics to replace workers in repetitive jobs. Another reason is the huge influence of sophisticated software that cuts time and increases accuracy of many formerly labor intensive functions, such as check-in procedures at airports, complex mathematical underwriting calculations, and a host of similar service and office functions.

After next year, in 2019, it will be interesting to look back and identify which of these predictions have actually occurred. We may see larger companies embracing many of these trends, while smaller organizations will continue to be squeezed by the market costs, resulting in keeping their benefits the same or passing more of the costs onto the employees.

The predictions are based on CRI’s view of its “Crystal Ball”, based on what is occurring among our clients. Some of the issues may not come to pass, while others could rise to the top of the list. We don’t believe we have all the answers; however, we stay on top of what is happening, and will let our readers know when other topics and trends appear.

About Compensation Resources, Inc. (CRI): CRI provides compensation and human resource consulting services to mid- and small-cap public companies, private, family-owned, and closely-held firms, as well as not-for-profit organizations. CRI specializes in executive compensation, sales compensation, pay-for-performance and incentive compensation, performance management programs, and expert witness services.

Paul R. Dorf, APD    

Chairman, Managing Director

Compensation Resources, Inc.

877-934-0505 • Fax: 201-934-0737

http://www.CompensationResources.com

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