Maintain a Competitive Edge with Benefits

Creative compensation and benefits packages attract and retain top talent.

December 28, 2012

Organizations continue to face the challenge of designing compensation packages to attract and retain top talent.

This hasn’t changed since the financial crisis and subsequent recovery. And it isn’t likely to change in the future because of organizations’ fierce competition for talent, especially executives.

Executive pay in for-profit businesses continues to increase despite weak profit growth. In fact, many companies aren’t making the necessary profits to cover executive compensation levels so they’re looking to fund these packages in other ways.

Some are cutting expenses to provide the executive pay at competitive levels. Methods of reducing expenses include trimming benefits or other expense items. For some companies, this means more job cuts.

The financial services industry—particularly Wall Street firms—are among the companies using these compensation strategies.

Total compensation on Wall Street increased 4% in 2011, according to a New York state comptroller report, the highest increase since 2008. But at the same time, Wall Street firms are boosting profitability by decreasing the number of employees on their payroll, the report notes.

Because compensation and benefits typically account for about half of organizational operating expenses, fewer employees would significantly reduce expenses. And many employers are operating at staff levels as low as they can go following cutbacks during the recession.

CU staffing & benefits

CU Directors Newsletter The number of layoffs at credit unions has tapered off since the onset of the recession. Few credit unions let employees go in 2011, and few expected to do so as well in 2012.

Unlike some other industries, financial services firms face a growing regulatory burden. The result is increasing operating and compliance costs.

These cost increases, along with low profitability growth, make it difficult for credit unions and other financial institutions to offer the compensation and benefits necessary to attract and retain top talent.

Because these elements play a starring role in recruitment and retention efforts, credit unions must be more creative when putting together compensation and benefit packages.

Compensation is a fixed cost, so organizations often turn to the benefits package to find ways to reduce overall costs.

Among credit unions with $5 million or more in assets, overall 2011 benefits expenses averaged $420,532, according to CUNA’s 2012-2013 Credit Union Staff Benefits Survey. In addition, the average benefits expense per full-time employee was $12,838.

Health-care benefits expenses accounted for more than half of overall benefits expenses. In 2011, health-care benefits specifically averaged $239,415.

Credit unions paid an average of $6,711 per full-time employee for health-care coverage.

The cost of providing health-care insurance to employees continues to increase, and it’s expected to climb at more than twice the rate of inflation in 2012, according to the National Business Group on Health.

Among credit unions offering health benefits to employees, 83% experienced an increase in healthcare costs from 2011 to 2012. And of these credit unions, the average increase was 11%.

A common method of controlling the costs of health-care coverage is requiring employees to pay a higher portion of premiums. Credit unions are quite likely to use this method. In fact, when asked what actions they expect to take to control 2013 health-care coverage costs, 43% of credit unions say they’ll increase employees’ share of these costs or ask employees to share in these costs.

Other ways credit unions plan to reduce 2013 health-care coverage costs include:

BETH SOLTIS is CUNA’s senior research analyst. Contact her at 608-231-4056.

This article first appeared in Directors Newsletter.