Beth Soltis

From Beth Soltis:

Some credit unions have asked me whether they should do a compensation analysis when they have frozen salaries and have not budgeted for pay increases in 2011.  The answer is an unequivocal yes.  And I’ll explain why.

First, recruitment and retention efforts should be tied to an organization’s market position.  How do you know what components of your compensation package to highlight if you don’t know where you stand in the market?  How do you know how to converse with employees frustrated by stagnant pay if you don’t know where you stand in the market?  Your market position can shape how you present your compensation package and how you communicate with employees about it.

Second, how can you motivate your employees to perform at their best if you don’t know where you stand in the market?  Appropriate (affordable, cost effective, and in line with market demand) compensation levels encourage and reward high performance, which in turn drives organizational performance.  Knowing your market position is crucial in developing motivation and reward strategies.

Finally, it is essential to monitor your compensation plan to ensure it is successful.  A successful compensation plan meets three key criteria – internally equitable, externally competitive, and accurately reflects the credit union’s compensation philosophy – according to CUNA’s 2010-2011 Complete Guide to Setting Salaries.  And the only way to be sure these three key criteria are met is to do a compensation analysis.

A lot of credit unions are in the position of being unable to provide pay increases to their employees.  In the 20+ years that CUNA has conducted the Complete Credit Union Salary Survey, we have never seen numbers like this: 43% of credit unions with $1 million or more in assets initiated a salary/wage freeze in 2009, according to CUNA’s 2010-2011 Complete Credit Union Staff Salary Survey. This percentage has almost doubled from 23% in 2008. Additionally, 43% of credit unions anticipate doing so in 2010.

And credit unions are not alone.  In fact, 64% of employers froze pay increases in the last 18 months, according to a 1st quarter 2010 study by Buck Consultants. However, due to the impact of heavy workloads and stagnant salaries, experts advise employers to analyze their ability to provide wage increases and/or variable pay to reward and retain their employees as soon as business conditions allow.  And whether or not employers can provide pay increases, at a minimum they should acknowledge the heavy workloads employees are shouldering and show appreciation for employees’ efforts.

Obviously, credit unions can only pay what they can afford.  But armed with the knowledge of where compensation falls compared with the market, credit unions can ensure the effectiveness of their recruitment and retention efforts, their motivation and reward strategies, and their compensation plan.

Have you conducted a compensation analysis lately?  What benefits and improvements have you seen after completing your analysis?

Beth Soltis is the Senior Research Analyst for the Market Research department at the Credit Union National Association.