Personnel(ly) Speaking
Personnel Management
Systems, Inc.
Current Compensation Trends: what’s happening now and what to expect in
the future
This month we are pleased to
have Doug Sayed, SPHR, CCP comment on the current compensation
environment. Founder of Applied HR
Strategies, Doug consults with companies on compensation strategies and
programs in addition to being one of the leading providers of pay data to
technology companies.
Our labor markets are very healthy - recently
released data for March 2006 shows that the
According to the
Metro Denver Development Corporation, that area added 26,100 net new jobs in
2005, a 2% growth over the previous year. About half the jobs lost in the
2002-2003 recession were added back in 2004 and 2005, and per capita income in
the area is growing faster than the national average.
Overall, in March
2006 the national unemployment rate was 4.7%, with
Technology, accounting and finance jobs are hot – technology sector job demand and growth is quite healthy, with employment for software publishers up 8.0% year-over-year based on preliminary March data. Demand for software engineers in particular is quite high. Earlier this year the Washington State Department of Employment Security reported that there were more job openings for software engineers than for any other job category, outstripping far larger job categories such as nursing.
While many
technology jobs are hot, so is the demand for middle to upper level accounting
and finance professionals and managers.
This once placid job category has heated up in today’s post
Sarbanes-Oxley and post-Enron environment.
In addition, tougher compliance demands, stock option expensing, and a
greater emphasis on financial reporting accuracy and transparency have placed a
premium on professionals with deep financial compliance, planning and analysis
skills.
Merit pay trends flat - The WorldatWork 2005 – 2006 Salary Budget Survey Update projects a 3.5% pay increase for exempt employees in 2006, up very slightly (+0.1%) from the actual 2005 data, but virtually unchanged from the past few years. Merit pay remains at historically low levels, despite positive economic growth for the three years and counting. Most national data shows 2004 and 2005 actual merit data near 20 year lows – in the vicinity of 3.4%-3.5%, and projections for 2006 show virtually the same thing.
Stock option
expensing goes into effect and the sky doesn’t fall
– after a bruising
but lost battle over stock option expensing, technology companies (like
everyone else) will now have to expense the “fair value” of their stock option
grants. FAS 123R (Financial Accounting
Standards, Rule 123, revised) went into effect starting with fiscal years
beginning on or after January 1. Early
in the battle over stock option expensing, lobbyists and other pundits
predicted lower stock prices, lost jobs and worse, but none of these have
happened. A recent article in the Wall
Street Journal entitled “Tech Companies Give Stock-Options Value and Actually
Survive,” states that now that expensing is in effect and occurring, “the
reaction is mostly a shrug.”
Stock option
usage continues to decline
– several events, trends and indicators continue signaling a reduction in the
use of stock options. Some recent studies
have shown a roughly 30-40% decline in the number of options granted from the peak
period 1999-2001. There is a trend toward reducing both the amount of stock
given, as well as a reduction in eligibility for stock options. Data from the current survey shows that over one-third (35%) of all
participants (and a majority of public companies) have reduced the number of
stock options offered to the workforce in the past year. Many factors
are impacting these changes, and they are developing slowly, but clearly,
nonetheless.
All in all, the economic outlook is good although employers may find it more difficult to fill open positions. For help with your company’s compensation problems or even if you just have questions, you can call either Personnel Management Systems, Inc. at (425) 576-1900 or Applied HR Strategies at (425) 827-3881.
Personnel(ly) Speaking is a monthly comment on HR
issues of importance. It is intended to
provide general information and must not be construed as legal advice. Reproductions are allowed as long as credit
for this information is given to PMSI.
We welcome your comments, questions, and concerns. © PERSONNEL MANAGEMENT SYSTEMS, INC.,
Corporate Office (425) 576-1900, Colorado Office (720) 497-0200, www.hrpmsi.com.