Compensation Trends

By Beth Soltis
Senior Research Analyst
Credit Union National Association

Across all industries, salaries are projected to rise an average of 3.7% in 2005, a slight increase over 3.6% in 2004, according to Salary.com. If this prediction holds true, it is the fourth consecutive year of average pay increases below 4%. Organizations are hard pressed to allocate funds for pay increases when benefit cost increases – reflecting the rise in health care costs – are currently at their highest growth levels in two decades.

Base pay increases among credit union employees are fairly consistent with national trends. In 2004, nonmanagement employees received average base pay increases of 3.7%, while management employees averaged 3.9%, according to CUNA’s 2005 Complete Credit Union Staff Salary Survey. Both figures represent a slight decline from 2003 figures. Budgeted pay increases for 2005 are similar to those in 2004, but credit unions are cautious about their 2006 pay increase projections.

For many employees, even moderate pay increases are welcome after several years of salary freezes and layoffs. And the good news is that salary freezes are fast becoming a thing of the past. The percentage of U.S. employers reporting salary freezes for one or more employee segments has been declining steadily from a high of 16% in 2002, to just 2% in 2005, according to Mercer Human Resource Consulting.

Salary freezes are also becoming less common among credit unions, but they are still more prevalent than what is found across other industries. The percentage of credit unions with $1 million or more in assets reporting a salary/wage freeze has decreased from 15% in 2003 to 10% in 2004. Furthermore, only 7% anticipate a salary/wage freeze in 2005.

In an effort to attract and retain top talent in today’s low wage marketplace, more companies are offering bonuses in lieu of pay raises. Nationwide, 86% of companies offer variable pay, including signing bonuses, spot cash awards, and project milestone awards. Furthermore, according to a survey by Accountemps, 46% of chief financial officers say that bonuses are the most effective compensation for a job well done.

Overall, 63% of credit unions with $1 million or more in assets and at least one full-time employee offer incentives and/or bonuses to some or all employees. Credit unions are somewhat more likely to offer incentives to management employees than to nonmanagement employees – 60% offer variable pay to management employees and 50% offer variable pay to nonmanagement employees. Moreover, bonuses continue to be more common at credit unions than incentives. The percentage of credit unions offering incentives to management and nonmanagement employees has remained fairly constant. However, the percentage offering bonuses is increasing.

Balanced incentive portfolios, which tie incentives to specific goals, are gaining in popularity since they allow companies to place an appropriate amount of pay at risk in order to motivate people. Essentially, companies calculate what they can afford to pay by quantifying the results of meeting company goals. This type of incentive plan also counters the criticism of plans that reward employees at a level that is not consistent with the employee’s performance.

Understanding the principals of a competitive compensation package is the first step in competing for and retaining top talent. The second step is making sure your credit union’s compensation program is competitive. CUNA’s 2005 Complete Credit Union Staff Salary Survey. Both and customized report options present average salary, incentive, bonus, total variable pay, total cash compensation, and salary range averages for 89 full-time and 8 part-time positions within credit unions with $1 million or more in assets. Just the information you need to master compensation planning.

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