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Wednesday, 24 September 2014 22:35

As compensation remains relatively flat in West Michigan, employers weigh options

Written by  Jill Hinton | Special to MiBiz
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Businesses of all sizes wrestle with how much to pay their employees, as well as where to locate to get the right mix of skilled workers at an affordable price.

According to local survey data, West Michigan employers appear to have struck a delicate balance.

In 2013, West Michigan wages and benefits paid by private employers increased by an average of 3 percent overall, according to Local Wage and Salary Survey issued last year by The Employers’ Association (TEA) in Grand Rapids.

“Grand Rapids wages have been improving over the last several years,” said Maggie McPhee, TEA’s director of information services.

The report also looked at a specific set of 11 job titles ranging from production workers to managers and found wages increased for those positions by an average of 2 percent compared to the previous year, McPhee said.

Employer compensation costs in the region averaged $28.86 per hour (over 410 job titles) in 2013. Nationally, private employers reported compensation costs average $30.11 an hour, according to the Department of Labor.

When compared to national compensation data, West Michigan wages are approximately 5 percent less than national averages for similar jobs, McPhee said. This is likely because the national data include salaries from major metropolitan areas across the country where cost-of-living expenses are higher than West Michigan.

The TEA survey represents compensation data from 195 West Michigan companies, reporting data on 362 jobs, and is sorted by size, geography, industry and sales volume, as well as provides information on the number of hours worked and differences in shift pay. The report also analyzes data collected on bonuses and includes full job descriptions for the representative positions it includes.

A new 2014 report with updated numbers and data will be available in late October. That report will provide even more data that will help West Michigan companies make decisions about growth and competitiveness, providing local companies clarity in their compensation strategies, McPhee said.


Changing landscape

Compensation isn’t the only thing changing — so are the costs of benefits. While wages rose at an average rate of 3 percent per year, the cost of providing benefits to employees went up more than 5 percent for the year.

MiBiz recently reported that a family health policy this year costs an average of $419 a month, or an annual premium of $13,860, according to an annual survey conducted by a partnership of TEA and the Alliance for Health in Grand Rapids. Additionally, employers will continue to use other benefits, such as vacation time, paid time off and tuition reimbursement, to try to save money when negotiating salaries.

As companies continue to adjust to the requirements of the Affordable Care Act, employees can expect their salaries and other benefits to be affected, sources said.

According to national staffing company Robert Half Inc., U.S. starting salaries for professional occupations are projected to increase an average of 3.7 percent in 2014, with technology jobs seeing the largest gains of 5.6 percent for newly hired workers. New finance and accounting professionals can also expect a raise at an average of 3.4 percent.

Companies in every industry are looking to manage costs wherever they can, and The Employers’ Association sees employers more frequently using variable pay incentives, including pay-for-performance arrangements, McPhee said.

But there are other factors at play as well, including the aging of baby boomers out of the job market and more spending on both internal and external training programs to help employees improve their skills. That training also serves as a recruiting tool.

“We are seeing more interest in recruitment and retention due to the lack of skilled workers in the West Michigan market,” McPhee said. “Some employers are considering pay increases for entry-level jobs.”

McPhee added that this increase is not related to the recent minimum wage increase passed on Sept. 1.


Tech in focus

Of the industries experiencing a talent shortage, the gap in supply and demand is especially pronounced in the information technology sector, said Beth DeWilde, owner of Paragon Recruiting LLC, a technology-focused staffing agency based in Holland.

“It comes down to the fact that there aren’t enough people going into technology to keep up with the demand for those people,” DeWilde said. “(It’s) supply and demand — basic economics.”

DeWilde encourages her clients to look for candidates who offer more than just certifications or education.

“You can’t train attitude. Look for the personal characteristics that you find important (like) work ethic, passion for technology, problem-solving skills and being able to make decisions,” she said. “Have a way to be able to assess if an individual has the ability to pick up on things the way you would expect them to.”

DeWilde says most of her clients look at current pay rates within the company when determining how much they’ll offer a new hire.

“Compensation has to do with the value the position brings to the company,” DeWilde said. “You have to assess (what) you are paying your people that are there now to be able to retain your employees as well as attract the people you’re looking for.”


Six trends that will affect salaries

According to a recent survey conducted by Kutchins, Robbins & Diamond, a Chicago-based accounting firm, there are six trends that will affect salary negotiations in 2014:

  1. Job-loss fears will be reduced as the job market improves. Since the market is no longer as tight, employers don’t have as much leverage with current employees as they did in years past.

  2. Merit increases for existing employees are still being tempered by the economics of recent recessions. Annual pay raises are still very flat as a result of the last few years of companies’ stunted profits and revenues.

  3. I.T., health care and energy salaries will see significant increases. Right now, there isn’t enough talent to fill the demand, so professionals in these industries can demand higher pay and benefits.

  4. Pay-for-performance plans will continue to gain popularity. Companies use these types of arrangements to hedge their bets when it comes to compensation, but those organizations that are profitable should expect to pay big when bonus time rolls around.

  5. New hires will see the biggest pay raises. Many companies are taking the risk of paying their new hires at higher rates than their existing employees. Be careful — this could backfire, especially when it comes to your best employees, the report says.

  6. In-demand specialists will be able to demand higher salaries — assuming they change jobs. Again, those employees who have in-demand skills and certifications often change jobs to increase their pay.

 

Read 3587 times Last modified on Wednesday, 24 September 2014 22:47

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