Higher increases, more bonuses

Signing bonuses, game rooms making a comeback in the West

Due to a strong push for talent in the West, some employers might start to wonder if it’s 1999 again.

Signing bonuses and retention bonuses are back, as are TV lounges and game rooms in office buildings, said Gail Evans, president of the Calgary-based consultancy the Wynford Group. It’s all rather reminiscent of the Y2K hiring rush that IT workers enjoyed in the years leading up to 2000.

In its latest IAT (Information and Advanced Technology) National Surveys of more than 350 occupations, the Wynford Group forecasted increases in base salary to be about 4.8 per cent in Alberta in 2007, compared to about four per cent across Canada.

The increases are particularly high in jobs with a strong technical component, such as engineering and construction, which are expected to increase by five per cent. In Alberta’s dynamic oil and gas sector, salary increases are projected at more than 5.5 per cent.

But there’s more to the story than base salary increases.

“Because there’s a strong requirement to attract and retain people, there’s significant use of signing bonuses and retention bonuses,” said Evans, referring to the pressure felt among employers right across Canada.

Signing bonuses range from $1,000 to $8,000 and typically require candidates to stay with the employer for a minimum of six months to a year. Sometimes they come in the form of gadgets, such as a BlackBerry or laptop. Retention bonuses are typically paid out after one to three years of employment.

Evans also noted a marked increase in education subsidies, with 85 per cent of respondents offering this program. Some employers also help recruits pay down student loans over one- or two-year time frames.

Despite such apparent largesse, employees still identify compensation issues as the most critical when joining a company, followed by career development opportunities and work-life balance. When asked why people leave, career development comes first then compensation.

“I think that’s because people are always hearing some rumours about someone across the street making 20 per cent more,” said Evans. “Everybody wants to be paid equitably for what they do.”

As a national average, salary increase projections for 2007 have come in at the 3.4 to 3.8 per cent range. Towers Perrin’s compensation forecast tells a similar story, with the most common being 3.0 per cent.

“To me that’s not the story,” said Marc Ullman, leader of Towers Perrin’s executive compensation and rewards practice. “The story is what (companies) are doing for performers. How are they differentiating between high and low performers?”

Ullman said he’s finding companies are differentiating between star performers and underachievers more than in the past.

“There are a lot of companies doing a lot of research on talent management and workforce needs in the future, and those companies that are being diligent there tend to spend more time deciding where to place their bets and where to invest their dollars,” said Ullman.

“There’s more differentiation today than yesterday. The question is, what can your organization handle? How much of a culture shock would that be to suddenly go from ‘everybody gets three’ to ‘now the highest performer gets nine and the lowest gets zero and everybody else gets two?’ That would represent a major change for a lot of companies.”

Differentiation is clearly seen among senior ranks. According to Towers Perrin’s The Changing Landscape of Executive Compensation: 2006 Executive Compensation Proxy Report, companies on the S&P/TSX 60 with high performing return on equity paid their CEOs 50 per cent more in total direct compensation than companies with lower return on equity.

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