Effective Compensation Programs Involve More than Base Salary, According to Hewitt Survey

    Variable Compensation, Perks Used to Attract and Reward Key Employees

    TORONTO, Sept. 24 /CNW/ - While salary increases are expected to be lower
in 2009 than in 2008 for most employees, many high performers have
opportunities to boost their overall earnings by more than the average 3.6 per
cent increase, according to research conducted by Hewitt Associates, a global
human resources consulting and outsourcing company. Organizations are relying
on variable compensation - performance-related rewards that must be re-earned
each year and do not increase base salary - and, in some locations and for
some roles, perquisites to attract, retain, incent and reward key employees.
    As the Canadian economy shows signs of a downturn in some sectors and in
certain locations, salaries are not expected to increase by as much in the
coming year as they did in 2007 and 2008, when raises averaged 3.8 per cent
nationally. Even in Alberta, where salary increases still exceed those offered
in the rest of the country, increases are expected to get smaller. In 2007,
actual salary increases in Alberta were 6.0 per cent, decreasing to 5.6 per
cent in 2008. Projected average salary increases for 2009 in Alberta are 5.0
per cent.
    "Base salaries in Alberta will continue to increase, but not at such high
rates," said Jeff Vathje, a senior compensation consultant in Hewitt's Calgary
office. "Data from our 2008-2009 'Canada Salary Increase Survey' also
indicates that fewer employers see a need to compensate workers in Calgary and
Edmonton at a higher rate than those in other parts of the country." In 2007,
52 per cent of employers paid workers in Calgary more than those doing similar
work in other locations. In 2008, that figure dropped to 42 per cent. Edmonton
also experienced a 10 per cent drop, with 25 per cent of employers providing
extra salary to workers in that city in 2007, and only 15 per cent doing so in
2008. Two Alberta locations have not experienced a decline in employers
offering extra pay, however: Fort McMurray held steady at 23 per cent, while
12 per cent of organizations in Grande Prairie did so in 2008, up from 6 per
cent in 2007.

    Hot Jobs and Hot Locations

    The supply of workers with certain skills or training - particularly
engineering and information technology - is so low compared with the demand
for these employees that 36 per cent of Canadian organizations make special
compensation arrangements outside of base salary to attract and retain them.
The same holds true for certain locations: 63 per cent of employers go to
special lengths to recruit and hang on to workers in specific parts of the
country, particularly Alberta.
    This additional compensation takes a variety of forms. Sign-on and/or
retention bonuses, a living or housing allowance (or housing loan or subsidy)
are the most frequently offered monetary arrangements, while non-monetary
awards include perquisites such as a cell phone, computer, Internet hook-up,
car allowance, flexible work arrangements, assistance in locating housing, and
additional vacation time.
    "Engineers in Fort McMurray are likely doing pretty well," noted Ian
MacRae, a compensation consultant in Hewitt's Toronto office. "Not only are
they receiving higher salaries than their counterparts in other locations,
they're probably receiving a range of special compensation arrangements to
ensure they stay with their employer."

    Compensation Aligned with Business Objectives

    Even employees who don't have hot skills or work in hot locations may
have an opportunity to gain additional income over and above their base
salary. "Eighty-six per cent of employers provide variable compensation
programs," said MacRae. "Employees receive a bonus if certain corporate,
divisional and/or individual goals are attained."
    However, employers are finding that creating and implementing a
successful variable pay program may be harder than it seems. Two-thirds
reported difficulty in designing pay programs that give employees a clear line
of sight between their achievements and their reward. In addition, 61 per cent
cited enabling managers to have effective pay conversations with their reports
as a challenge.
    "Successful variable pay programs have the ability to help employers
drive business objectives, as well as keep employees focused on their goals in
order to realize their earning potential," explained Vathje. "The program
must, of course, be designed appropriately and administered properly. However,
it is also critical that employees understand how the variable compensation
plan works. Without a clear grasp of what they need to accomplish in order to
help the organization succeed and be rewarded themselves, the program isn't
going to work. Employers run the risk of losing key talent to competitors that
appear to pay more when that happens."
    Copies of the Hewitt Associates' 30th Annual "Canada Salary Increase
Survey" are available at www.compensationcenter.com.

    About Hewitt Associates. For more than 65 years, Hewitt Associates
(NYSE:   HEW) has provided clients with best-in-class human resources consulting
and outsourcing services. Hewitt consults with more than 3,000 large and
mid-size companies around the globe to develop and implement HR business
strategies covering retirement, financial and health management; compensation
and total rewards; and performance, talent and change management. As a market
leader in benefits administration, Hewitt delivers health care and retirement
programs to millions of participants and retirees, on behalf of more than 300
organizations worldwide. In addition, more than 30 clients rely on Hewitt to
provide a broader range of human resources business process outsourcing
services to nearly a million client employees. Located in 33 countries,
including Canadian offices in Toronto, Montreal, Vancouver, Calgary and
Regina, Hewitt employs approximately 23,000 associates. For more information,
please visit www.hewitt.com.

For further information:

For further information: Marcia McDougall, Hewitt Associates, (416)
227-5713, marcia.mcdougall@hewitt.com

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