2014-15 Compensation Trends A closer look at the Canadian technology market Trista Straver, Senior Survey Consultant October 23, 2014 One Firm. Complete Solutions.
Agenda Global and Canadian Market Trends Q2 Hot Topics Report: Performance Management Evaluating the Effectiveness of Variable Pay 1 | ITAC: 2014-15 Compensation Trends
Global and Canadian Market Trends 2 | ITAC: 2014-15 Compensation Trends
Canadian Market Outlook 10.0% 8.3% 8.0% 7.6% 8.0% 7.3% 7.3% 7.0% 6.0% 4.0% 3.2% 3.0% 3.0% 3.1% 3.0% 2.9% 2.6% 2.9% 2.3% 1.8% 2.0% 1.5% 1.8% 1.5% 0.9% 1.5% 1.5% 0.3% 0.0% 2009 2010 2011 2012 2013 2014 -2.0% -2.5% -4.0% GDP Inflation Unemployment Salary Increase Source: IMF WEO Database, April 2014, Radford Trends Report (Canada), Q3 2014 Technology edition. 3 | ITAC: 2014-15 Compensation Trends
Global Market Trends Similar to years past, Canada has relatively low turnover, and less aggressive hiring and market movement; however, we are seeing a slight increase in average voluntary turnover (+0.7%) over last year Average Expected Average 2014 Overall Voluntary Aggressive Workforce Salary Increase Region Turnover Hiring Increasing* Budget (Diluted) Argentina 11.3% 2.9% 11.3% 20.3% Brazil 10.6% 6.1% 15.2% 7.6% Canada 9.3% 4.4% 15.9% 3.0% China 12.8% 10.9% 32.9% 7.9% India 13.9% 13.0% 28.9% 10.5% Russia 10.9% 1.8% 11.5% 7.6% United Kingdom 11.6% 9.8% 24.6% 3.1% United States 11.2% 16.4% 42.8% 3.2% *Percent of companies responding Source: Radford Trends Report (Canada), Q3 2014 Technology edition. 4 | ITAC: 2014-15 Compensation Trends
Canadian Historic Hiring Environment Normal hiring is stable in Canada vs. more aggressive hiring in the US Notably, aggressive hiring at Canadian companies has increased from 2013 to 2014; the hiring freeze rate has decreased 100% 2.2% 2.4% 1.7% 6.1% 6.2% 5.9% 90% Percent of Companies 80% 54.9% 70% 56.3% 52.9% 63.3% 56.7% 60.3% 60% 50% 40% 30% 27.1% 35.4% 37.6% 31.6% 20% 30.2% 29.8% 10% 16.4% 5.8% 5.6% 4.4% 3.7% 3.7% 0% 2010 2011 2012 2013 2014 US 2014 Aggressive Selective Normal Hiring Freeze Source: Radford Trends Report (Canada), Q3 2010, Q3 2011, Q3 2012, Q3 2013 and Q3 2014 Technology editions. 5 | ITAC: 2014-15 Compensation Trends
Canadian Expected Workforce Changes Over the next 12 months, two-thirds of companies expect to stay the same size The percent of companies expecting to remain the same size is the same as last year, while the number of companies expecting to increase headcount is up almost 2% Expected Changes in Full-Time Workforce (Next 12 Months) 70% 65.7% 60% 50% % of Companies 40% 30% 20% 14.1% 12.3% 10% 4.3% 3.6% 0% Decrease Stay The Same Increase by up to Increase by more Unknown Size 10% than 10% Source: Radford Trends Report (Canada), Q3 2014 Technology edition 6 | ITAC: 2014-15 Compensation Trends
Canadian Historical Turnover Voluntary turnover is up slightly from Q3 2013 to Q3 2014 Overall turnover is slightly higher year over year Lack of aggressive hiring affects voluntary turnover 20.0% 17.3% 17.3% 16.1% 15.4% 15.0% 13.6% 8.0% 6.8% 9.7% 6.8% 4.4% 10.0% 5.0% 9.3% 9.3% 9.2% 8.6% 7.6% 0.0% Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Voluntary Involuntary Source: Radford Trends Report (Canada), Q3 2010, Q3 2011, Q3 2012, Q3 2013 and Q3 2014 Technology editions. 7 | ITAC: 2014-15 Compensation Trends
How can we address turnover in hot jobs? First, it is important to look at turnover in detail Is “regrettable turnover” a significant problem? Is compensation the “real issue”? Second, confirm whether “hot jobs” are roles or skills For role-based issues, look at recently-added survey jobs—for example, Data Scientist, Social Media Analyst, Online Merchandising Skills-based issues like cloud computing and data security are not often captured in job titles/HRIS making analysis harder US Annual Base Salary Radford Survey Job July 2010 July 2014 Change Social Media Relations Spec 1 $43,364 $45,966 5.7% Social Media Relations Spec 2 $53,887 $58,412 7.7% Social Media Relations Spec 3 $68,626 $75,675 9.3% Social Media Relations Spec 4 $93,483 $104,891 10.9% Source: Radford Trends Report (Canada), July 2013, 2014 Technology edition. 8 | ITAC: 2014-15 Compensation Trends
Canadian Base Salary Increase Trends Overall salary increases are stable at around 3% since 2011— this mirrors the trend in the US, where budgets are static and 3% increases remain the norm 3.5 3.0 2.8 3.0 2.8 3.0 2.6 3.2 3.0 2.8 3.0 2.5 2.8 2.5 2.0 1.5 1.0 0.9 0.5 0.0 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Canada Overall Actual Average (Undiluted) Canada Overall Actual Average (Diluted) Source: Radford Trends Report (Canada), Q3 2009, Q3 2010, Q3 2011, Q3 2012, Q3 2013 and Q3 2014 Technology editions. 9 | ITAC: 2014-15 Compensation Trends
Canadian Merit and Overall Increases Average Diluted Salary Increases 2014 Budget 2014 Actual 2015 Budget Merit Overall Merit Overall Merit Overall Overall Population 2.7% 3.0% 2.6% 2.8% 2.9% 3.2% Sales Population 2.4% 2.7% 2.3% 2.5% 2.7% 2.9% Salary Increase Delivery Trends Prior Year/Next Action 2014 to 2015 Freeze/Freeze 2.1% Freeze/Increases 4.1% Increases/Increases 93.8% Source: Radford Trends Report (Canada), Q3 2014 Technology edition. 10 | ITAC: 2014-15 Compensation Trends
Q2 Hot Topics Report on Performance Management 11 | ITAC: 2014-15 Compensation Trends
How Well Do Pay and Performance Connect? In Q2 2014, our Hot Topics survey examined the connection between merit increase levels and the number of performance ratings in use at a company (e.g., 3 ratings vs. 6 ratings) Results show that much more work can be done to connect performance ratings to actual salary increase outcomes To begin, companies reported number of ratings: Number of Performance Ratings Levels Radford Q2 Hot Topics Survey Questions 3 Levels 4 Levels 5 Levels 6 Levels Other Prevalence of Companies with this 14% 18% 59% 6% 3% Number of Performance Ratings Levels Prevalence of Employees with the 20% 12% 6% 4% n/a Highest Rating (“Top Performers”) Source: Radford GTS Trends Report (Canada), Q2 2014 edition, Hot Topics. 12 | ITAC: 2014-15 Compensation Trends
Employee Population Receiving Increases Over 60% of companies still provided more than 90% of employees with salary increases in 2013 Percentage of Global Population Receiving a Salary Increase 60% 53.6% 50% 40% 50 th Percentile 30% 17.5% 20% 11.7% 9.9% 7.4% 10% 0% Under 60% 60% to 79% 80% to 89% 90% to 99% 100% Source: Radford Trends Report (Canada), Q2 2013 Global Technology Edition Hot Topics Survey 13 | ITAC: 2014-15 Compensation Trends
Performance Management Deep Dive Do You Have A Formal Do You Have the Same Performance Management System for All Countries? System? No No 10% 16% Yes Yes 84% 90% Are You Considering Eliminating Performance Ratings? Yes 8% No 92% Source: Radford Trends Report (Canada), Q2 2014 Technology edition, Hot Topics. 14 | ITAC: 2014-15 Compensation Trends
How Do Companies Manage Performance? United States Performance Management Approach % of Companies Written reviews and formal rating 87% Written reviews, no formal rating 6% Rating, no written evaluation 3% Formal feedback, no rating or written evaluation 4% Source: Radford Trends Report (Canada), Q2 2014 Technology edition, Hot Topics. 15 | ITAC: 2014-15 Compensation Trends
How Do Companies Allocate Ratings? Most technology companies responding to our survey rely on general “guidelines” for assisting managers in allocating performance levels, and 24% have no forced ranking system at all 2014 Forced Ranking System Used/ Performance Rating Distribution Controlled Technology Limit top rating to specific % of employees 7.5% Require specific distribution of employee ratings 9.9% Recommended distribution 53.5% No target or guideline rating distribution requirements in use 23.5% Source: Radford Trends Report (Canada), Q2 2014 Technology edition, Hot Topics. 16 | ITAC: 2014-15 Compensation Trends
How Do Companies Score Performance? Most companies use a 5-rating system to provide two levels above the middle to identify “high performers”; no changes over several years 100% 5% 8% 9% 9% 90% 80% Percent of Companies 70% 52% 59% 56% 59% 60% 50% 40% 30% 24% 19% 23% 18% 20% 10% 16% 16% 14% 13% 0% 2007 2008 2012 2014 3 Ratings 4 Ratings 5 Ratings Other (6+ Ratings) Source: Radford Trends Report (Canada), Q2 2014, Q2 2012, Q4 2008 and Q1 2007 Technology editions, Hot Topics. 17 | ITAC: 2014-15 Compensation Trends
What About Companies Without Ratings? For companies without formal ratings, manager discretion largely determines merit increases Performance plays a role in the manager’s decision about pay increase size, even without a rating scheme and formal written reviews No rating is intended to focus the conversation on development opportunities rather than evaluation 18 | ITAC: 2014-15 Compensation Trends
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