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HR Bulletin July 16, 2010

International Training Conference & Expo Video

The July 2010 issue of HR News magazine (4.7 MB) is now online.
The Summer 2010 issue of Public Personnel Management (2.3 MB) is available online.
Press releases on the IPMA-HR Web site may be accessed here.
To access archived issues of the HR Bulletin, click here; you must be a member of IPMA-HR in order to access these archived issues.

Salary Survey Projects Modest Increases for 2011

NEW YORK – U.S. salary increase budgets remain historically low, but projections for 2011 show a modest increase, according to The Conference Board annual salary increase budgets survey report released this week.

For the second straight year, the median salary increase budget is 2.5 percent. Projections for 2011 show a modest increase to three percent. (Salary increase budgets refer specifically to the pool of money that an organization dedicates to salary increases for the coming year. Generally, it is represented as a percentage of current payroll.)

“This less-than-robust increase is an indication that the economic recovery has not yet picked up enough strength to significantly raise salary budgets to a level consistent with a healthy economy,” said Christopher Woock, researcher, human capital, The Conference Board. “But the news is not all grim. There appears to be little risk of inflation eroding the real value of the increase.”

The lowest median salary increase budget forecast for 2011 is in the transportation industry—2.25 percent for exempt employees and executives. The insurance industry is also below the three percent median overall forecast for non-exempt salaried, exempt, and executives, while the banking sector reported the lowest projected 2011 increase for non-exempt, hourly employees. Across industries, the 2011 forecast for salary increase budgets showed little variation, with no employee group in any industry projected to exceed the overall median of three percent.

The projections for 2011 salary increase budgets are up from the actual 2010 increases. The largest year-over-year projected increases are in the diversified services industry—where the projected 2011 median salary increase budget is 0.5 to 3 percentage points higher than the actual 2010 budget—and in the diversified financial services industry—where the projected 2011 median salary increase budget is 0.5 or 0.63 percentage points higher than the actual 2010 budget.

Pay for performance continues to be the common approach for the allocation of salary increase budgets, as companies remain focused on higher-performing employees and growth businesses. While most companies have not budgeted general increases, overall merit increase percentages for both 2010 actual and 2011 projected budgets mirror the trend of those of total increases.

The information for this report was gathered from 313 companies surveyed between April 7 and April 30, 2010.

The Conference Board is a global, independent business-membership and research association working in the public interest. Its mission is unique: To provide the world’s leading organizations with the practical knowledge they need to improve their performance AND better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States.

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New EBRI Study Shows Wide Variations by Income and Time Eligible to Participate in a Defined Contribution Plan

WASHINGTON – With Americans living longer in retirement, the 2010 EBRI Retirement Readiness Rating™ released this week shows dramatically high percentages of Americans—even in the upper income categories—are likely to run short of money after 10 or 20 years of retirement.

The new analysis by the nonpartisan Employee Benefit Research Institute (EBRI) finds that almost two-thirds (64 percent) of Americans in the two lowest preretirement income levels will be running short after 10 years in retirement.

However, the EBRI study also finds that after 20 years of retirement, almost a third (29 percent) of those in the next-to-highest income level will run short of money, as will more than one in 10 (13 percent) of those in the highest-income level. Not surprisingly, those with the highest income are at the lowest risk of running short of money—but many in the highest income category still face significant risks of not being able to pay basic expenses and uninsured medical expenses for the remainder of their lives.

The EBRI Retirement Readiness Rating™ is based on EBRI’s Retirement Security Projection Model® (RSPM), which the institute first used in 2003 to evaluate national retirement income adequacy. The newest version of the model factors in many new retirement plan changes, such as auto-enrollment and auto-escalation of contributions in 401(k) plans, as well as updates for financial market performance and employee behavior (based on a database of 24 million 401(k) participants).

This is the first time a national retirement model has been able to project when different cohorts of Americans, based on age and income, are likely to exhaust their retirement savings. For instance, it finds that nearly half of early Baby Boomers—those on the verge of retirement, currently ages 56 to 62—are at risk of not having sufficient income to pay for basic retirement expenditures and uninsured medical expenses, and nearly the same fraction of “Generation Xers” are in a similar position.

Among other things, the analysis provides the most detailed estimates yet published of how age, relative level of preretirement income, and eligibility for participation in a defined contribution plan (principally a 401(k) plan) affect the prospects of running out of money in retirement. It also shows how long early boomers’ resources are likely to last in retirement.

Results appear in the July 2010 EBRI Issue Brief, written by EBRI Research Director Jack VanDerhei and senior research associate Craig Copeland. The complete methodology and assumptions used to arrive at the findings appear in the Issue Brief.

“As the private-sector retirement plan system evolves from a largely paternalistic one to a system in which workers must make their own decisions, policymakers need to understand what percentage of the population is likely to fail to achieve retirement security under current conditions,” said Jack VanDerhei, principal author of the study. “Even more important is to identify which of those households still have time to modify their behavior to achieve retirement security, and how they need to proceed. This analysis demonstrates that in ways we have not seen before.”

Key findings from the EBRI Retirement Readiness Ratings™:

How Long Money Will Be Enough in Retirement: The analysis shows how long early boomers’ retirement money will not fall short, by preretirement income quartiles, assuming retirement at age 65. Again, those households with the highest income have the lowest levels of risk.

  • The results after 10 years of retirement:
    • Lowest-income quartile: 41 percent are likely to run short of money.
    • Next-lowest quartile: 23 percent.
    • Third income quartile: 13 percent.
    • Highest-income quartile: 5 percent.
  • After 20 years of retirement:
    • Lowest-income quartile: 57 percent are likely to run short of money.
    • Next-lowest quartile: 44 percent.
    • Third quartile: 29 percent.
    • Highest-income quartile: 13 percent

Those “At Risk” of Running Short of Money, by Age: The 2003 and 2010 Retirement Readiness Ratings™ provide a baseline projection of being “at risk” of having insufficient income to cover basic retirement expenses, as well as uninsured health care costs, for three age groups:

 

2010

2003

Early Boomers
(now ages 56–62):

47.2 percent chance of
being at risk

59.2 percent chance

Late Boomers
(now ages 46–55):

43.7 percent chance

54.7 percent chance

Generation Xers
(now ages 36–45):

44.5 percent chance

57.4 percent chance

The Pension Protection Act of 2006 led to widespread adoption of automatic enrollment and diversified default investments in 401(k) plans, leading to increases in participation rates, earlier account accumulations, and better long-term retirement preparation prospects.

When the results of the analysis are classified by future eligibility in a defined contribution plan, such as a 401(k), the differences in the “at-risk” percentages are quite large. For example, Gen Xers with no future years of eligibility have an “at-risk” level of 60 percent, compared with only 20 percent for those with 20 or more years of future eligibility.

An individual or family is considered to “run short of money” if their aggregate resources in retirement are not sufficient to meet aggregate minimum retirement expenditures—defined as a combination of basic expenses from the Bureau of Labor Statistics’ Consumer Expenditure Survey and some health insurance and out‐of‐pocket health-related expenses, plus expenses from nursing home and home health care expenses, at least until the point they are picked up by Medicaid.

While knowing the percentage of households that are “at risk” is obviously valuable, it does nothing to show how much additional savings is required to achieve the desired probability of success. Therefore, the analysis also models how much additional savings would need to be contributed from 2010 until age 65 to achieve adequate retirement income 50, 70 and 90 percent of the time for each household.

It is important, the analysis says, to understand that a retirement target based on averages (such as average life expectancy, investment experience, and health care expenditures in retirement) provides, in essence, a retirement planning target that has approximately a 50 percent “failure” rate. Adding the 70 and 90 percent probabilities allows more realistic modeling of a worker’s risk aversion. Results of this analysis appear in the Issue Brief.

EBRI is a private, nonprofit research institute based in Washington, D.C., that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby and does not take policy positions.

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Average Starting Salary to New College Grads Slips 1.3 Percent

BETHLEHEM, Pa. – The average starting salary offer to Class of 2010 graduates is down 1.3 percent compared to the average posted last year at this time by the Class of 2009, according to a new study conducted by the National Association of Colleges and Employers (NACE). 

NACE’s Summer 2010 Salary Survey shows that the overall starting salary offer to Class of 2010 bachelor’s degree graduates now stands at $48,661—down from an average of $49,307 posted last year at this time. 

Among the business disciplines, accounting grads saw their average offer dip less than one percent to $48,691. Business administration graduates also experienced a drop: Their average offer fell 2.4 percent to $43,879. Much of that loss can be attributed to the types of positions these graduates were most likely offered—sales and management trainee jobs, both of which had average starting salaries below $40,000. 

Economics graduates, conversely, saw their average salary offer increase over last year. Economics graduates now average $50,885, a 2.1 percent increase. Finance graduates also got a “raise,” albeit a modest one; their average offer now stands at $50,356, a 0.8 percent increase. 

For information sciences grads, the average increase was not modest. These graduates now average $55,084—a 5.7 percent increase. The average starting salary offer to computer science majors did slip, but just by 0.5 percent to $61,112.

As a group, engineering majors have consistently posted increases to their average salary offers, and seemingly have been immune to negative economic effects. During the 2008 reporting year, their increases ranged between five and seven percent, and, even as the economy fell, they continued to enjoy increases ranging from two to four percent during the 2009 reporting year. This year, that has changed, and, as a group, engineering grads now average $58,970—a 0.5 percent decrease.

Within the engineering fields, chemical engineering graduates enjoyed a 1.1 percent increase, for an average offer of $65,628, but many of the disciplines—including computer engineering, electrical engineering, and mechanical engineering—saw their average offers decrease. Computer engineering graduates saw the biggest decrease in the group: Their average offer fell 2.9 percent to $59,917. Electrical engineering graduates’ average salary offer dropped 1.2 percent to $59,381, and the average offer to mechanical engineering graduates dipped less than one percent to $58,457. 

As a group, those earning degrees in the liberal arts saw their average offer fall 3.9 percent to $34,747. However, some of the individual disciplines in the liberal arts category fared better. English majors, for example, saw their average offer climb 7.1 percent to $37,154, and the average offer to sociology grads rose 5.7 percent to $35,173. 

History and psychology graduates landed on the other end of the scale, with decreases to their average salary offers of 2.1 percent and 5.6 percent, respectively. The average offer for history majors currently stands at $37,055 and at $32,358 for psychology majors. 

NACE will continue to track the movement of starting salary offers to Class of 2010 graduates through its Salary Survey report. The final report for the Class of 2010 will be published in September.

About Salary Survey: Salary Survey is a quarterly report of starting salary offers to new college graduates in 70 disciplines at the bachelor's degree level. The survey compiles data from college and university career services offices nationwide. Salary Survey is issued in winter, spring, summer, and fall, with the fall issue serving as the year-end report. (Please note: The report does not include data for all industries.)

The National Association of Colleges and Employers (NACE) has been a leading source of information about the employment of college graduates since 1956. For more information, click here.

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June CEO Departures Exceed 100 for the Fifth Straight Month

CHICAGO – Turnover among the nation’s chief executive officers fell 16.8 percent in June, as 107 departures were announced during the month, down from 125 in May. June marks the fifth consecutive month with more than 100 departures, according to the latest report on CEO turnover released last week from global outplacement consultancy Challenger, Gray & Christmas, Inc.

Last month’s departures were nearly even with June 2009, when 105 CEO exits were recorded. Overall, the pace of CEO turnover is up 11 percent from a year ago. Through the first six month of the year, a total of 673 CEO changes were announced, compared to 607 during the same period last year.

Through the first half of 2010, resignation has been the most commonly reason for departure, cited by 201 outgoing CEOs. That is up from 152 at this point last year. Another 112 CEOs have stepped down, which typically indicates that the CEO remains with the company in some capacity; usually as a director or chairman of the board.

The second most common reason for departure was retirement, which was cited by 190 exiting CEOs in the first six months of the year, compared to 108 retirements in the first half of 2009.

As a sign of the volatile economy in which current corporate leaders must operate, 19 CEOs have been removed or pressured to leave by the board. Another 11 departing CEOs cited economic conditions for their exits, while four were ousted in the wake of some legal entanglement or other public scandal. This brings the number of involuntary departures in 2010 to 34. At this point in 2009, there were 27 involuntary departures.

“Of course, many of the 201 resignations may also have been involuntary, to some degree,” said John Challenger, chief executive officer of Challenger, Gray & Christmas. “However, companies do not publicly admonish the outgoing CEO unless he or she was particularly damaging to the organization. In many cases, companies are simply making leadership changes based on a shift in corporate strategies. These types of changes occur with more frequency when the economy is in flux, as it is now.”

One area of the economy that has continued to struggle, even as the economy begins to recover, is the government and non-profit sector. These struggles are reflected in CEO departures among these organizations, which total 97 so far this year, up from 74 at the midpoint of 2009. The sector had the highest number of departures in June with 21.

Despite its struggles, the government and nonprofit sector is not the leading CEO turnover sector for the year. The health care sector is the top turnover sector, with 112 CEO exits, up from 95 a year ago.

“The health care sector, like government and nonprofit agencies, are also struggling under budget constraints brought on by the recession,” Challenger said. “The sheer number of hospitals and other health care organizations, relative to companies in other industries, also appears to result in an inordinate number of CEO changes. In other words, there simply are more health care employers compared to other industries, which means more CEOs and more CEO changes.”

Challenger noted, “Whether it’s tied to changes in the economy or simply an aging CEO population, we are definitely seeing an increase in turnover. Companies need to be thinking about succession plans, even if their CEO’s position appears secure. Is the replacement going to come from within the company or will it be an outsider? If it’s an insider, what steps are being taken to prepare that person for the position? If it’s an outsider, who is on the shortlist and why? Unfortunately, some companies get caught unprepared when a CEO suddenly retires due to health or family issues and resulting leadership vacuum can adversely impact the organization from top to bottom.”

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July 21 Webinar to Focus on Testing & Discrimination Issues in the Supreme Court

Join us Wednesday, July 21, 2010, from 1-2:30 p.m. Eastern Time for an informative webinar in which employment law expert Larry Lorber, a partner with the law firm Proskauer Rose LLP, will highlight the impact of recent Supreme Court decisions relating to discrimination and testing. 

On May 24, 2010 the Supreme Court issued a unanimous decision in the case Lewis v. City of Chicago that under Title VII’s disparate impact provisions every time an employer uses a particular employment practice it starts the clock running again. At issue was the city’s use of a well-qualified list to hire firefighters, the underlying test had a disparate impact and the city unsuccessfully argued that the firefighter applicants were time-barred from bringing a suit because they waited until the city started hiring from the list to sue.

And, last June, the Supreme Court ruled in a 5-4 opinion in the case Ricci v. DeStefano that the city of New Haven, Conn., violated Title VII when it threw out test results because it believed the test had a disparate impact on minorities.

Sign Up Today and Your Entire Staff Can Listen In for One Fee 

Download your registration form and fax the completed form to (703) 684-0948, or e-mail it to meetings@ipma-hr.org.

The price for IPMA-HR members to participate in the webinar is $150; the price for nonmembers to participate in the webinar is $200.

There is no limit to the number of staff from your office participating in this webinar. In the room where staff will participate, you'll need a speaker phone and a computer. Prior to the event, you will get instructions on how you will link to the webinar by telephone and on the Internet. One registration fee gives you a unique access code for one phone line and a link to the Web component. As many of your staff that you can pack into a room can attend and listen in by speakerphone. Please note: Additional phones lines require additional access codes, which means separate registrations for each additional access code you need.
 
Cancellation Policy
You may cancel your registration up to 48 hours in advance of the webinar, and transfer your registration to a future webinar without penalty. If you do not transfer your registration, you must cancel no later than one week prior to the webinar date to receive a full refund of your fee.

Questions? Contact us by phone at (703) 549-7100, or by e-mail at meetings@ipma-hr.org.

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Register Today for the 2010 IPMA-HR International Training Conference

The IPMA-HR International Training Conference & Expo is the largest gathering of public sector HR professionals anywhere. Keynote speakers and educational sessions have already been set for the October 2-6 conference, which will be held at the Sheraton Seattle in Seattle, Wash.

During the conference, participants will meet the best and the brightest in the public sector HR profession. With more than 20 educational sessions, you and your agency will reap the benefits of best management practices, success stories, tools and practical solutions. Participants will also have the opportunity to turn their biggest challenges into their greatest accomplishments when learning from experts, leaders in the field and fellow practitioners.

It’s true; budgets are tight, especially for state and local governments. That’s why it’s even more important that you attend the conference. Finding out how other public sector HR agencies are navigating through these difficult times is essential for dealing effectively in this economy. Everyone can benefit by your attending the conference; participants can be a force for change in their organization by bringing home the knowledge they gain while in Seattle.

Make Your Hotel Reservation Now!
The Sheraton Seattle Hotel has set aside a limited block of rooms for IPMA-HR conference attendees at the special rate of $189 (+tax)/night for single and double rooms. The special rate is in effect until September 9. All rooms are available on a first-come, first-served basis or until the room block is at capacity. After September 9, or until the room block is at capacity, reservations will be taken on a space- and rate-available basis only. Reservations can be made by calling the Sheraton reservation line at (800) 325-3535 and referencing the IPMA-HR Conference.

Questions about the conference can be directed to the IPMA-HR meetings department by e-mail at meetings@ipma-hr.org. Please continue to check the conference Web site at www.ipma-hr.org for updates.

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On the Calendar

July 18
Seminar: Job Analysis
In conjunction with the 2010 IPAC Conference.
Newport Beach, Calif.
Contact IPMA-HR Professional Development and Research Coordinator Heather Corbin at hcorbin@ipma-hr.org or click here for more information.

August 25
Online Course
Developing Competencies for HR Success

September 19-22, 2010
Eastern Region Conference
Adlephi, Md.

September 22
Online Course
Developing Competencies for HR Success

October 2-6, 2010
2010 International Training Conference & Expo
Sheraton Seattle Hotel & Towers
Seattle, Wash.
Contact IPMA-HR Director of Membership and Professional Development Jessica Allen at jallen@ipma-hr.org or click here for more information.

October 6
Online Course
Managing Employee Performance as an HR Business Partner

Watch the HR Bulletin and our Web site for more information on educational opportunities.

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