No Thaw in the Salary Freeze
CUs are finding creative ways to motivate staff despite stagnant pay and bonuses.
• Budgeted salary increases for management and nonmanagement staff are about 2% through 2011.
CUs are finding creative ways to motivate staff despite stagnant pay and bonuses.
Last year, the recession caused credit unions to place their salary and benefits packages in the deep freeze. This year, with an economy that seems to take two steps forward and three steps back, those compensation packages remain well-frozen.
“Most credit unions have already used attrition to reduce their staff levels, and they’re being very conservative with hiring, raises, and bonuses,” says Beth Soltis, Credit Union National Association (CUNA) senior research analyst. “This year—in terms of compensation—looks like a repeat of last year.”
CUNA’s 2010-2011 Complete Credit Union Staff Salary Survey Report shows that credit unions are still taking a cautious approach to compensation.
Salary freezes common
In a typical year, roughly 90% to 95% of credit unions give raises. In 2009, however, only 77% did, according to CUNA’s survey. “A similar percentage of credit unions plan salary increases in 2010,” says Soltis. “Plus, in the past two years, we’ve seen the number of credit unions that are freezing at least some salaries jump to 43%—nearly double the 23% that froze salaries in 2008.”
These numbers are even more dramatic when compared with the recent past: Only 15% of credit unions froze wages in 2007 and 7% did so in 2006.
Credit unions that were able to increase wages generally gave small raises. In 2009, the average salary increase for both management and nonmanagement employees was 2.6%.
Budgeted salary increases for 2010 and 2011 are even lower for both groups at about 2.2%. Wage increases in 2008 and 2007 were 3.5% and 3.9%, respectively, according to previous CUNA salary surveys.
Credit unions plan to offer fewer bonuses—rewards not tied to preset personal performance criteria: 49% of credit unions in 2010 versus 57% in 2009 and 62% in 2008.
Many credit unions keep it open-ended. University Credit Union in Boston tells staff they’re essential to the credit union’s success. “If we have a good year, they’ll share in it,” says William Sinibaldi, president/CEO of the $59 million asset credit union.
It’s a good idea to consider extraordinary circumstances when determining bonuses, says Linda Reynolds, president/CEO at $81 million asset Pinellas Federal Credit Union in Largo, Fla. “Our team worked extraordinarily hard during a recent switch to an in-house Visa program. Our board recognized that and was able to provide a bonus when the numbers alone might not have supported it.”
Humble hiring plans
Hiring also remains stagnant. Only 20% of credit unions plan to add employees this year, which is the same percentage as last year. That’s down from 30% in 2008 and 35% in 2007. Among credit unions that do plan to add staff, the average is 3.3 new full-time and 1.7 new part-time employees.
“Remember, there’s a level you can’t drop below without compromising your member service,” cautions Sinibaldi.
There’s one bright spot in this area: lower turnover. In 2009, 88% of credit union employees remained in their positions versus 85% in 2008 and 81% in 2007. Among employees who changed positions or were hired in 2009, 9% filled existing positions, while 3% filled newly created ones.
“But don’t take employee retention for granted,” says Soltis. “There’s always a market for top performers, and if you’re not finding ways to meet their needs, you risk losing them, even in this economy.”
As long as staff compensation remains stagnant, credit unions must find other ways to motivate staff. Several strategies that have worked for credit unions include:
• Connect with employees. Communication should be continuous and two-way, not a crisis-driven, top-down anomaly, says Pat Palmer, principal and CEO at Where Eagles Soar. “‘Management by walking around’ is critical. It helps to build relationships and to ensure the CEO actually knows what’s going on at the credit union.”
Reynolds follows this advice. She holds monthly employee meetings and requires each employee to send her weekly e-mail examples of good leadership and bad leadership they’ve observed. “And they tell me what they’re doing to improve their own skills,” she says. “This creates a culture where employees understand they’re a critical part of our success.”
• Create community, both inside the credit union and out. “We have cross-functional teams to handle different internal projects, such as our recent rebranding efforts. And they also volunteer with outside organizations,” says Audra Mead, vice president of human resources and administration at $336 million asset CitizensFirst Credit Union in Oshkosh, Wis.
When you have bad news to share, just do it—preferably face-to-face, says Soltis. “Employees know when things aren’t going well. Take control of the information instead of leaving them to make inferences,” she says.
• Be creative with employee rewards. Many credit unions can’t afford to increase salaries, and they might not have to.
“Don’t assume money is the reward employees value most,” says Palmer, who recommends using private questionnaires and focus groups divided by age. Gen Y employees don’t necessarily value the same types of rewards that baby boomers value, he says, suggesting that credit unions determine what employees value and then deliver on their requests, when possible.
Sinibaldi recommends promoting from within whenever possible. “It’s a win-win for everyone: The cost is lower to us, we have a proven performer who supports our credit union’s philosophy, and it shows that we value making an investment in our employees.”
A growing number of credit unions are also using pay-for-performance, which ties rewards to preset performance criteria. Almost 30% of credit unions had a performance system in place this year, versus roughly 25% in 2009, according to CUNA’s salary survey. There’s a direct correlation between asset size and the likelihood of offering these programs: Only 6% of credit unions with less than $10 million in assets use pay-for-performance, versus 40% of those with $50 million to $100 million in assets, and 70% of credit unions with more than $1 billion in assets.
“Employees’ cross-selling efforts should be a natural outgrowth of relationship-building,” says Mead. “We teach our employees that when you take the time to know your members, you’ll be able to point them in the direction of needed products and services, and we reward employees who create this opportunity.”
• Help employees get the most out of their health-care plans. Rising health-care costs continue to drive up credit union expenses. This can potentially undermine employee satisfaction. Credit unions are using two strategies to fight back: options and education.
“When we can’t keep insurance costs as low as we like, we try to make up for that with more choices,” says Reynolds. “Having some control goes a long way toward increasing employee satisfaction with the program.”
CitizensFirst uses education to empower employees and reduce cost increases. “We’ve brought in experts to show employees how their health-care choices—for instance, using the emergency room when urgent care might have been more appropriate—affect costs,” says Mead. “We’ve also created wellness programs and rewarded people for exercise and weight loss.”
As a result, the credit union has been able to keep health-care premium cost increases in the single digits for its employees, compared with the double-digit jumps faced by many employers in recent years.
Transparent pay policies
Credit unions might not get lumped with the “Wall Street fat cats” blamed for many of the current economic woes, but that doesn’t mean they can afford arbitrary pay policies.
“Your compensation plan has to be internally equitable and defensible and externally competitive, and must accurately reflect your credit union’s compensation philosophy,” says Soltis. “It also must be legally compliant.”
As credit unions make plans for strengthening their operations coming out of the recession, University Credit Union’s simple mantra might help: “Be better,” says Sinibaldi. “It’s tough out there. If we can look at each thing we do, and give ourselves a continuous challenge of trying to improve, we’ll get through this.”
THE TRUE COST OF COMPENSATION
No report on salaries and expenses is complete without a look at their impact on your bottom line.
Operating expenses among credit unions with $1 million or more in assets averaged about $3.9 million in 2009, according to CUNA’s 2010-2011 Complete Credit Union Staff Salary Survey Report. On average, salary expenses account for 41% of these credit unions’ total operating expenses. Benefits expenses account for 9.6% of operating expenses.
Looking solely at salary expenses, credit unions spent an average of $1.3 million in 2009. And credit unions overall averaged $374,291 in benefits expenses in 2009—about $11,000 per full-time employee.
Overall, when expressed as a ratio of gross income, salary and benefits expenses equal 43.2% and 9.8% of gross income, respectively.
About 55% of credit unions with $1 million or more in assets have sponsors, but few say their sponsors pay for any portion of the credit union’s salary or benefits expenses. Only 1% of credit unions say their sponsors pay any portion of the credit union’s salary expenses, and 2% say their sponsors pay any portion of the credit union’s benefits expenses.
For more information on the report and CUNA’s suite of supplemental salary survey resources, visit cuna.org, and select “products & services” and “reports & surveys.”
• CUNA, buy.cuna.org:
1. 2010-2011 Complete Credit Union Staff Salary Survey Report: select “products & services” and “reports & surveys.”
2. 2010-2011 Credit Union Environmental Scan: select “products & services” and “2010-2011 E-Scan Report.”