CEO–Employee Pay Gaps Widen in US and UK

CEO–Employee Pay Gaps Widen in US and UK

The latest analysis by the left-leaning Economic Policy Institute calculates that the CEOs of the largest 350 companies in the US out-earned their employees by a factor of 312:1 last year, the Guardian reported on Thursday:

The rise came after the bosses of America’s largest companies got an average pay rise of 17.6% in 2017, taking home an average of $18.9m in compensation while their employees’ wages stalled, rising just 0.3% over the year. The pay gap has risen dramatically, with some fluctuations, since the 1990s. In 1965 the ratio of CEO to worker pay was 20-to-one; that figure had risen to 58-to-one by in 1989 and peaked in 2000 when CEOs earned 344 times the wage of their average worker. …

The astronomical gap between the remuneration of workers and bosses has been brought into sharper focus by a new financial disclosure rule that forces companies to publish the ratio of CEO to worker pay. Last year, McDonald’s boss Steve Easterbrook earned $21.7m while the McDonald’s workers earned a median wage of just $7,017 – a CEO to worker pay ratio of 3,101-to-one. The average Walmart worker earned $19,177 in 2017 while CEO Doug McMillon took home $22.8m – a ratio of 1,188-to-one.

In the UK, meanwhile, new research by the CIPD and the High Pay Centre finds that the median CEO-employee pay ratio for FTSE 100 companies stood at 167:1 in 2017, rising from 153:1 the previous year:

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Salary Budget Surveys Project Only Modest Wage Growth for US Employees Next Year

Salary Budget Surveys Project Only Modest Wage Growth for US Employees Next Year

Despite historically low levels of unemployment and high demand for labor, salary budget surveys for 2018-2019 suggest that US wages will grow on average by just about 3 percent both this year and next year, continuing a trend of lackluster raises despite labor market conditions that theoretically should push earnings higher. The WorldatWork 2018-2019 Salary Budget Survey projects a mean average wage growth of 3.2 percent and a median 0f 3.0 percent next year, little changed from 3.1 percent (mean) and 3.0 percent (median) in 2018.

Employers are continuing to devote a significant share of their salary budgets to variable pay, WorldatWork found, but these budgets also aren’t growing, SHRM’s Stephen Miller observes:

Some 85 percent of U.S. employers gave out performance-based bonuses or other forms of variable incentive pay in 2018, the survey shows, and the amount of variable pay budgeted and paid out, for all employee categories, has been stable for several years. When total rewards professionals were asked about their variable pay budgets for 2019, their responses were virtually unchanged from the amounts budgeted for this year and … for 2017.

Alison Avalos, director of membership and total rewards strategy at WorldatWork, tells Miller that one reason why these budgets aren’t increasing is that employers are increasingly using benefits to attract and retain talent instead of cash rewards, including intangible benefits like professional development opportunities and purpose-driven organizational cultures that align with employees’ personal values.

Similarly, Willis Towers Watson’s 2018 General Industry Salary Budget Survey finds that US professionals can expect raises of 3.1 percent on average next year, compared to 3.0 percent this year. Wage growth has leveled off at around 3 percent per year over the past decade. Their survey also found that star performers would once again see higher increases next year, and registered a slight increase in budgets for discretionary bonuses:

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STEM Talent May Have a Bright Future in Sales

STEM Talent May Have a Bright Future in Sales

“With more informed buyers to contend with and data as their most powerful sales weapon, sales teams are incorporating more STEM backgrounds within their ranks,” Jared Lindzon writes at Fast Company, in a piece exploring how data and technology skills are becoming as important as interpersonal skills for sales professionals, if not more so:

According to a 2017 study by the Bureau of Labor Statistics, the seventh most popular career for STEM graduates in the United States and most popular noncomputer related role is in sales. … “We are seeing thousands of jobs across the United States in which sales teams are looking for people with STEM related skill sets,” says Glassdoor community expert Scott Dobroski. According to Dobroski the job listing and recruiting website has seen a huge spike in postings for positions that blend sales with STEM skills. …

The demand for STEM skills within sales teams is representative of a seismic shift in sales strategy. This transition has been enabled by technology and the availability of information, both on behalf of the buyer and seller. While the salesperson used to be the primary source of information for their products or services, buyers increasingly have access to specs, samples, and independent reviews. At the same time sellers are able to access information and insights about prospective buyers that would have previously been only accessible through personal interactions.

The nature of the sales role has indeed changed in today’s business environment, especially in B2B sales, where the typical buyer is now most of the way through their decision-making process before engaging with a supplier. This means salespeople need to be comfortable wielding more facts and figures, but also must be adept at managing relationships.

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UK Labor Market Tightens as Europeans Leave, but Wages Remain Stagnant

UK Labor Market Tightens as Europeans Leave, but Wages Remain Stagnant

The latest labor market bulletin from the UK Office for National Statistics, released on Tuesday, shows that the number of citizens of other EU countries working in the UK has declined in the past year by the largest amount since the government began collecting comparable records two decades ago. Between April and June 2018, approximately 2.28 million EU nationals were employed in the country: 86,000 fewer than in the second quarter of 2017. In the same period, the number of employed UK nationals increased by 332,000 to 28.76 million, while the number of non-EU foreign workers increased by 74,000 to 1.27 million.

Gerwyn Davies, senior labour market analyst at the CIPD, comments on the report to Personnel Today:

“Today’s figures confirm that the UK labour market has suffered from a ‘supply shock’ of fewer EU-born workers coming to live and work in the UK during the past year, compared with previous years. This has contributed to labour supply failing to keep pace with the strong demand for workers; which is consistent with another welcome fall in unemployment.” …

“The tightening labour market is putting modest upward pressure on pay, but this still isn’t leading to more widespread pressure due to ongoing weak productivity,” said Davies.

New employer survey data released on Monday by the CIPD and the recruitment firm Adecco showed that UK employers were experiencing staff shortages due to the low-unemployment environment and a decline in migration from the EU. The survey found that the number of applicants per vacancy had dropped across all roles since last summer, while 66 percent of employers said at least some of their vacancies were proving difficult to fill.

Nonetheless, this tight labor market isn’t translating into higher wages for most UK employees.

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Labor Department Announces $100M in Grants to Reskill Displaced Workers

Labor Department Announces $100M in Grants to Reskill Displaced Workers

The US Department of Labor announced last week that it was making available $100 million in “Trade and Economic Transition National Dislocated Worker Grants,” which will fund training and career services programs for workers affected by “major economic dislocations.” These grants will be disbursed to states, outlying areas, local workforce development boards, and other entities, by the department’s Employment and Training Administration, and are meant to address a variety of workforce challenges, including:

  • The economic and workforce impacts associated with job loss or employer/industrial reorganization due to trade or automation;
  • The loss, significant decline, or major structural change/reorganization of a primary or legacy industry, such as a manufacturing downturn due to technological advances, including impacts on the agricultural industry due to trade or other economic trends;
  • Other economic transition or stagnation that may disproportionately impact mature workers, putting them at risk for extended unemployment, lower wages, and underemployment.

Applications for grants are due by September 7, and the administration plans to begin awarding funds by September 30. It will continue to fund qualifying applications in the order they are received until all of the allocated funds are spent.

This is the first major initiative from the Trump administration focused on protecting the workforce from automation-related displacement. Treasury Secretary Steven Mnuchin took criticism last year when he downplayed the potential impact of automation on job loss, arguing that technological displacement would not be an issue for another 50 years or more.

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California Bill to Mandate Women on Boards Faces Challenge From Businesses

California Bill to Mandate Women on Boards Faces Challenge From Businesses

The California legislature is considering a bill that would make it the first state in the US to require women’s representation on the boards of companies headquartered there, but the business community is pushing back, saying the proposed mandate is unconstitutional and counterproductive, Antoinette Siu reports at TechCrunch:

SB 826, which won Senate approval with only Democratic votes and has until the end of August to clear the Assembly, would require publicly held companies headquartered in California to have at least one woman on their boards of directors by end of next year. By 2021, companies with boards of five directors must have at least two women, and companies with six-member boards must have at least three women. Firms failing to comply would face a fine. …

Yet critics of the bill say it violates the federal and state constitutions. Business associations say the rule would require companies to discriminate against men wanting to serve on boards, as well as conflict with corporate law that says the internal affairs of a corporation should be governed by the state law in which it is incorporated. This bill would apply to companies headquartered in California. … Similarly, a legislative analysis of the bill cautioned that it could get challenged on equal protection grounds, and that it would be difficult to defend, requiring the state to prove a compelling government interest in such a quota system for a private corporation.

Legislative mandates or quotas for women on corporate boards are rare, with only a few European countries having adopted them. Norway was the first to do so, introducing a 40 percent quota in 2003, while France, Germany, Iceland, and Spain have since introduced their own mandates. Sweden had an opportunity to join this group but declined it early last year, when the parliament voted down a proposal to fine listed companies where women make up less than 40 percent of directors. In these countries, quotas have proven effective at driving gender equality on boards; critics acknowledge this, but argue that making women’s representation a matter of compliance isn’t changing corporate cultures to really value women in leadership.

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Massachusetts Enacts New Restrictions on Non-Compete Agreements

Massachusetts Enacts New Restrictions on Non-Compete Agreements

After several years of legislative wrangling, Massachusetts Governor Charlie Baker on Friday signed a bill into law that will limit the conditions under which employers in the state can enforce non-compete agreements on their employees. The law goes into effect on October 1 and will apply to all non-compete agreements signed after that date. Lisa Nagele-Piazza outlines the law’s provisions at SHRM:

The Massachusetts law aims to prevent overuse of such agreements by prohibiting noncompetes with employees who are:

  • Nonexempt under the Fair Labor Standards Act.
  • Under age 18.
  • Part-time college or graduate student workers.

For a noncompete to be valid, it must be:

  • Limited to 12 months in duration (with some exceptions).
  • Presented to new hires either with an offer letter or 10 days prior to an employee’s start date, whichever is earlier.
  • Signed by the employer and the worker.

The agreement must also inform employees of their right to consult legal counsel before signing it. If employers want existing staff to sign noncompetes, they will need to offer “fair and reasonable” consideration beyond continued employment for the agreements to be valid.

The new law is also the first in the U.S. to require that employers offer “garden leave” pay to former employees bound by non-competes. The law requires to pay these employees 50 percent of the highest base salary they earned in the prior two years for one year after their departure, or some other “mutually agreed upon consideration.”

That alternative represents a huge loophole in the law, Michael Elkon, an attorney with Fisher Phillips in Atlanta, tells Nagele-Piazza. What sort of “consideration” counts as valid for the purposes of this law will likely be hashed out in court in the coming years, but Elkon notes that employers will expose themselves to a risk of litigation (before an unsympathetic judge) if they attempt to get around this provision by offering an employee a “consideration” that undercuts the law’s guidelines.

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