Compensation Caution

CUs continue to be cautious with their salary, benefits, and hiring strategies.

August 9, 2011
Compensation Caution

  FOCUS

  • Seventy-six percent of CUs anticipate increasing some wages this year, but 40% expect to freeze some wages.
  • Many CU employees have picked up the responsibilities.
    of other employees who left or were let go.
  • Board focus: Support staff appreciation events, monetary, rewards, and other incentives to retain quality employees.

 

Even though economists have declared an end to the Great Recession, most credit unions aren’t buying it. Conservative salary, staffing, and benefit plans indicate credit unions are waiting for stronger evidence of economic recovery before significantly increasing salaries or adding staff, according to CUNA’s 2011-2012 Complete Credit Union Staff Salary Survey Report.

With the chronically volatile stock market, inflation fears, low consumer confidence, and weak job growth, even credit unions on solid financial footing are wary of what the future holds.

“I see caution,” says Beth Soltis, CUNA’s senior research analyst. “Much of the data is the same as last year, which tells me credit unions are in a holding pattern.”

Bill Connor, president/CEO of America’s First Federal Credit Union, Birmingham, Ala., isn’t
optimistic about the overall economy, despite his own credit union’s relative stability and ability to weather turbulent times. In a year when the credit union maintained benefit levels and increased wages 4%, Connor still isn’t acknowledging any light at the end of the tunnel.

“I’m not sure it’s going to get much better,” he says of the economy, adding that he thinks his credit union will see a very slow rebound in consumer lending.

“I’m concerned that housing values won’t appreciate much, if any, through the rest of next year,” he adds. “There are some indications the housing market will come back by the end of this year, but I don’t believe it.”

Connor calls America’s First Federal’s situation “collateral damage.” The credit union didn’t get into risky lending, but the collapse of the real estate and lending markets affected the credit union and its members.

In 2005, for example, the $1 billion asset credit union had only three foreclosures. In the past 18 months, however, it has handled 58. Now the credit union has to manage properties, deal with vandalism, and process insurance claims. “We’re not used to managing 40 or 50 properties at one time,” he says. “We had to take someone from collections, and she’s now exclusively managing foreclosures.”

Next: Steady on Wages



Steady on wages

Salary survey results suggest other credit unions are responding similarly to the economy, as the number of credit unions increasing wages remains low. Among credit unions with $1 million or more in assets, the percentage providing wage increases to at least one employee decreased from 77% in 2009 to 73% in 2010. Also, the practice of freezing at least some wages held steady with 45% of credit unions in 2010 compared with 43% in 2009.

Soltis doesn’t expect these figures to change much in 2011, as 76% of credit unions anticipate increasing wages in 2011 and 40% expect to freeze some wages. The recent trends also suggest a new norm is emerging for the industry. There are no signs yet of returning to the “old norm” when about 95% of credit unions increased some wages in any given year and only about 5% froze wages, says Soltis.

“These figures had been stable for almost two decades until dipping in 2008, when 23% of credit unions initiated wage freezes and 92% increased some wages,” she adds. “The 2008 figures on wage freezes were considered alarming. Now, I’d consider it a stunningly positive trend to return to that level.”

The credit union industry is characteristically conservative, she concedes. That explains why many credit unions appear to be waiting for better economic news before increasing wages or expanding staff. It also explains why credit unions were less likely to get involved in the credit crisis that destabilized the banking industry.

There are risks, however, in playing it too safe. Some credit unions have recovered enough to resume more robust hiring and wage increases, says Soltis. But they’re waiting to see how health care and interchange income legislation play out before they take any significant actions. Holding the reins on salaries might protect the bottom line in the short term, but it could be counter-productive in the long term, Soltis cautions.

The problem is, a lot of credit union employees are doing the work of more than one employee as they pick up the slack for employees who left or were let go. If they don’t get some kind of recognition for that, credit unions will be heading for a staff-morale problem, she explains. “Simply acknowledging their hard work and sincerely thanking them can ease employees’ frustration and stress levels.”

Next: Turnover trends down



Turnover trends down

Credit unions have historically treated employees well. The industry has a reputation for investing in employees and valuing their ties to the community. Credit union employees, who often enjoy generous benefit packages, are aware of this goodwill.

But credit unions can’t rest on their laurels. “Employees have been known to stick with credit unions, but everybody has their limits,” Soltis says. “Ensuring that employees feel valued and play a significant role in the credit union’s success can inspire employees to hang in there.”

In Birmingham, bank consolidations have put many workers in the financial services market out of jobs. So competition for jobs remains high, and local industry unemployment has most of America’s First Federal’s staff staying put. “I think people were less likely to be looking around in the past year or so,” Connor says. “Most people were saying they were glad to have the jobs they have.”

The credit union’s turnover rate was down to 14% in 2010 after regularly ranging between 16% and 20%. But even with fewer jobs available, Connor acknowledges credit unions still risk turnover, particularly among lower-paid, less-experienced front-line staff. “They’re likely to move to another employer for a thousand-dollar raise,” he says.

It’s critical to pay a fair and competitive wage not only for employees’ best interests, says Connor, but also for the credit union’s best interests. Staffing consistency provides security and breeds member confidence, the importance of which cannot be overstated when overall consumer confidence in the financial sector has been shaken by scandal and government bailouts.

“The turnover in front-line staff is particularly disruptive for members. So much of our business is relationship-based, and members like to know who they’re dealing with,” Connor explains. “Members like to recognize a face. They like to be called by name. Every time you have new people there, you have learning curves. Members can sense that.”

Wages aren’t all that matter to employees. In a recent staff survey at America’s First Federal, employees indicated maintaining benefits was as important, if not more so, as increasing wages. The credit union responded by absorbing a relatively modest increase in health-care premiums rather than cutting coverage or passing the cost on to employees.

“I think our employees were very excited we weren’t chipping away at our employee benefits because of the economic situation,” Connor says.

This sentiment seems to hold true for the industry, as only 10% of credit unions reduced or eliminated benefits in 2010, while 45% froze wages and 16% cut or lowered bonus payments.

JoAnn McCausland, senior vice president of human resources (HR) for TruMark Financial Credit Union, cautions credit unions against looking at any of the employee compensation data in a vacuum.

Last year, TruMark Financial—a $1.2 billion asset credit union in Trevose, Pa.—increased wages and added 14 full-time employees, 12 of whom staff two new branches, while the other two are back-office hires in information technology and mortgage lending. The suburban Philadelphia credit union hasn’t touched the employer 401(k) match, nor has it adjusted any holiday schedules.

Overall, the credit union had a tremendous year. In fact, TruMark Financial has met its performance goals for the past four years.

The credit union implemented a health insurance premium, however, for single-employee coverage. In the past, it fully covered employee health insurance costs, and it continues to supplement dependent coverage.

Implementing the premium in isolation might be interpreted as an indication of financial insecurity or caution, but it wasn’t, says McCausland. Faced with double-digit increases in health-care costs, the credit union determined it made better sense to increase the employee contribution, while simultaneously creating a reimbursement program to offset some of that impact.

Next: Candid communication



Candid communication

Clear communication from management made the changes palatable to employees, McCausland says.

“We went out for open enrollment and it was the best year we’ve ever had,” she says. “The HR department communicated everything we knew. Then we realized our success was because we communicated so well.”

Communication is an invaluable tool, Soltis agrees, particularly in tough economic times. “You don’t want employees wondering why there are no raises or why benefits are changing,” she says. “If they’re not getting a lot of communication, they’ll dream up something and it’s usually worse than reality.”

At TruMark Financial, employees have plenty of opportunities to ask questions and get candid answers from management. Roundtable question-and-answer sessions give staff live access to executives, says McCausland, while anonymous employee surveys provide opportunities to weigh in on credit union management, morale, and other key areas along with compensation and benefits.

The surveys, administered by a third-party consultant, also contain open-ended questions that vary from year to year. Management then assesses the results and responds to any criticisms that emerge.

The results confirm McCausland’s high regard for TruMark Financial. “We invest a lot in our employees and we want to keep the talented employees in the credit union,” she says, noting that TruMark Financial provides leadership development and tuition reimbursement along with an employee recognition gala, service awards, and other events and programs designed to honor, develop, and retain staff.

“I’m not going to tell you we haven’t let people go, but it’s rare,” she says. “They’re our greatest asset and we treat them that way. People stay here, and they’re banging on the door to be a part of this organization.”

America’s First Federal also shows staff appre­ciation with lunches, team-building retreats, and other friendly games and prizes to foster a collegial environment.

A popular event, “blue jean day,” allows employees to pay $5 or $10 to wear jeans. And all the money goes to nonprofits or community causes, such as tornado relief.

Employees appreciate the opportunity to dress down and to raise money for good causes, says Connor. During a recent blue jean day, the atmosphere at branches was so festive, he says, “you’d have thought I’d walked around handing out hundred-dollar bills.”

Treating employees as assets is an investment that TruMark Financial’s management team believes brings a solid return. “Our philosophy here is keeping the lines of communication open and providing employees with the tools and resources they need,” McCausland says.

Other credit unions, particularly those that continue to stall on wage increases despite relatively healthy operations, should take heed, suggests Soltis. Rewards don’t have to be excessive, and enrichment programming can reflect the current economic situation with lunch seminars on work-life balance or time-management lessons. Work environment, corporate leadership, and effective communication, she explains, can all help maintain morale and engagement levels.

If credit unions don’t remain aware of morale levels and act when morale declines, says Soltis, “they’re definitely going to start losing people when other industries start hiring. A lot of employees are watching and waiting. But credit unions that aren’t ready to reward employees in dollars do have other options.” 

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