Ma’lob K’iin! That’s good morning in Mayan, and my Mayan calendar tells me it’s already September. When the months end in ‘ber, it’s time to check in on year end priorities for managing comp and ben. Here’s my third annual “Ber” to do list for C&B people.
The last few months you’ve made progress on your KPI’s but now planning season is upon you. A few things start to happen for companies on a calendar year fiscal year. They may not all apply, but I’ll bet most of these priorities apply to you:
Seven Comp & Ben Priorities
- 2016 Salary Budgeting–You must deliver salary increase budgets for each country. Good sources: Mercer, TowersWatson, Hay Group, AONHewitt and WorldatWork. Africa and Singapore can join the 21st Century survey as well. Check these surveys for merit increase projections for 2016, as well as mandatory increases (i.e. minimum wage). Google on ‘minimum wage’ for each country. Some companies budget for promotions, but most don’t since these companies also don’t budget for vacancies and they figure vacancies fund the promotions.
- 2016 Benefits Budgeting–You need to provide finance an inflation rate on your insured benefit premiums as well as self insured claims. Contact your broker and start shopping the market before blindly signing a renewal. If you’ve been with the same insurance company for 5 years, they are feeling comfortable so shop the market and make them re-earn your business. Locations with aging workforces will see higher premium increases. Developing locations are seeking to improve safety nets, for example, China is requiring both local and foreign employees to participate in China Social Insurance, so be sure to capture those in your budgets. TowersWatson has some of the best analysis of healthcare inflation in Asia, indicating healthcare costs are rising about 10%. Malaysia healthcare costs are rising as well due to big increases in government reimbursement rates for providers.
- Annual Market Analysis–Your compensation surveys are being published in the next several weeks, with some coming out in September. Don’t wait til the last minute! It’s tempting to wait til late October when all your surveys have been published (by Hay, TW, Mercer, McLagan, etc.) but remember you need to confirm your matching, check the year-over-year market movement by job, to see if there are jobs where the market moved up more the expected, or perhaps moved downward, in which case you have to decide whether to accept the new market value or stick to the current market value (and see if it goes down again next year). Your salary budget should only be final once you’ve confirmed your overall compa-ratios (average of individual compa-ratios) are ok. If your company lags the market by 10% in a country and you simply follow the salary increase trend (per item 1 above), you will not close the market gap, so be sure to add another 1% of payroll as a catch-up budget to be allocated to your low-paid high performers. At least don’t let these people lag the market, and you’ll slowly close your overall gap in a few years, too.
- Annual Pay Cycle Planning–Do you know who is running the annual merit/increment process? Who is responsible globally, regionally, by country? Who is working with the software vendor (if you use 3rd party software) for modifications and configuration? What are the milestone dates? How will Chinese New Year (31 January 2014) impact milestone dates, manager deadlines, performance rating calibration and approval, etc.? Who updates salary ranges? There’s a lot of work to be done for the annual salary review (annual increment). In comp, this is the biggest project of the year, so plan now.
- 2015 Incentive Accrual–One thing I recommend doing now is updating your forecast for 2015 incentive payouts (to be paid early 2016.) Finance needs to maintain their accrual on the balance sheet for the bonus payment liability. If incentive-related business performance has been low, payouts may be lower than budgeted, depending on your plan design and funding formula (if any). If so, it’s bad news for employees, but good news for finance, who can make plans to earmark potential surplus incentive budgets for other needs. However, if business performance has been good, your incentive accrual may be insufficient and finance may have to increase that accrual to avoid a year-end cash flow crisis.
- 2016 Incentive Design–You think September is busy, it gets worse each month now through next March, so do yourself a favor and get some things out of the way now. For next year’s incentive plans, ask some business leaders if they have any input/feedback on the current plan design, likely payouts, etc. Update your accruals (see step 5) and have an informal chat with your head of HR and head of Finance and see if they have any sense about the richness of payouts, who’s getting low (or no) payouts, who’s getting bigger payouts, etc. Is the incentive plan doing what it is supposed to do? Will it help attract, motivate and retain the best performing individuals? Is it rewarding the best performing teams, units, regions, etc.? If you can confirm that the plan is working well, then you can plan on a lighter incentive design process for 2016. If you get feedback that says something needs to change, then you should start more detailed planning now and make sure planning doesn’t get swept aside by merit and bonus planning, or other priorities in December and January. Ideally, new incentive plans/schemes should be issued in the first month of the new year, but no later than March, in most organisations.
- Finish your KPIs–it’s time to get realistic about what you can accomplish on your own time. What can you delegate? What do you need help with? If you (or your boss) have unspent consulting dollars, now is the time to get someone to help you get your KPI’s across the finish line. The only thing more tragic than not spending your consulting budget is not spending it AND failing to complete your KPIs!
One more priority applies to filipinos: it’s time to put up Christmas decorations!
Here’s wishing you a strong finish to 2015 and solid preparations for a successful 2016.
–TF