MERCER

FRAMING THE FUTURE

4 SEPTEMBER 2014

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Today’s speakers

1

ELIZABETHENGLISH

ALLISONGRIFFITHS

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Economic Overview

Highlights from the survey

Career Frameworks

Questions from the Audience

2

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The Canadian Economic Outlook

3

• Canadian growth continues to hover at 2 per cent,stronger in 2015

• Labour markets will slowly tighten, limiting growth

• Wages growing faster than inflation as labourmarkets slowly tighten

• Canadian businesses adapting to agingworkforce, strong(er) currency and embracinginnovation

Source: The Conference Board of Canada

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HIGHLIGHTS FROM THE SURVEY

4

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Mercer Research

5

MERCER 6

696PARTICIPANTS

20%

Services(Non-Financial)

1 %7Energy

%9Financial Services %7

High TechRetail & Wholesale

%6Consumer Goods

Other Durable Goods Manufacturing (6%) │ Mining and Metals (4%) │ Life Sciences (4%)Other Non Durable Goods Manufacturing (3%) │ Transportation Equipment (1%)

%5Insurance

Participant Profile

%10Other Non

Manufacturing

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1 %6 Less than 100 employees

100–299

%9 300–499

1 %4

1,000–2,999 2 %3

%7

500–999

3,000–4,999

1 %45,000 and over

1 %7NUMBER OFEMPLOYEES

Participant Profile

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Year All employees Exec Mgmt Professional Clerical Operational

2015 3.0% 3.1% 3.1% 3.0% 3.0% 3.0%

2014(actual) 3.0% 3.2% 3.1% 3.0% 3.0% 2.9%

2013(actual) 3.2% 3.4% 3.3% 3.1% 3.2% 3.0%

2012(actual) 3.2% 3.2% 3.3% 3.2% 3.2% 3.1%

2011(actual) 3.0% 3.1% 3.0% 3.0% 2.9% 3.1%

CANADA(all industries, all locations, excluding zeros)

2015 salary increase projections consistent with prioryears

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Year All employees Exec Mgmt Professional Clerical Operational

2015 3.1% 3.1% 3.1% 3.0% 3.0% 3.1%

2014(actual) 3.0% 3.1% 3.1% 3.0% 2.9% 3.0%

2013(actual) 3.1% 3.1% 3.1% 3.2% 3.1% 3.1%

2012(actual) 3.3% 3.3% 3.4% 3.3% 3.2% 3.1%

2011(actual) 3.2% 3.4% 3.2% 3.2% 3.1% 3.1%

SASKATCHEWAN(all industries, excluding zeros)

2015 salary increase projections consistent with prioryears

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OtherAlberta

GreaterCalgary

3.2

3.2

Saskatchewan3.1Greater

Vancouver

Manitoba

GreaterMontreal2.9 2.9

2.8

2.8

OtherQuebec

OtherOntario

Other BritishColumbia

GreaterToronto

AtlanticCanada

Territories

3.0

3.0

3.0

2.9

2.8

Provinces follow historical trends

3.22.83.0%

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0

1

2

3

4

5

6

7

0 1 2 3 4 5 6 7 8 9

11

Distribution of 2015 base salary increases20

15P

roje

cted

Bas

eS

alar

yIn

crea

se(%

)

MEAN: 3.1%MEDIAN: 3.0%

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Industry sectors follow historical trends

3.7

3.1 3.0 3.0 2.9 2.9 2.9 2.92.7 2.7 2.7 2.6

2015 average all-employee increase

EN

ER

GY

Ser

vice

s(N

on-F

inan

cial

)

Hig

hTe

ch

Min

ing

&M

etal

s

Fina

ncia

lSer

vice

s

Insu

ranc

e

Life

Sci

ence

s

Con

sum

erG

oods

Pub

licS

ecto

r

Ret

ail&

Who

lesa

le

Tran

spor

tatio

nE

quip

men

t

Not

-for-P

rofit

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Structure adjustments move slower than base salaryincreases

Base Salary Increase

Structure Adjustment

2.2% 3.0%

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Example of salary range movement for a “meetsexpectations” employee

Employee Base Salary

Salary Structure Midpoint

2010

$50,000 $56,075

2015

2015

$58,189

2010

2010 Compa-Ratio: 100% 2015 Compa-Ratio: 104%

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2%

9%

25%

7%

0.3%1.4% 2.9% 3.9%

5.0%

Lowest Low Middle Next highest Highest

PERCENTAGE OF WORKFORCE

15

Continued differentiation in performance and rewards

2014 Actual Performance Rating

57%

Average salary increase

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2015 Compa-Ratio: 91%

16

Example of salary range movement for an“outstanding” employee

Salary Structure Midpoint

2010

$40,000 $56,075

2015

2015

$51,197

2010

2010 Compa-Ratio: 80%

$50,000

Employee Base Salary

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Off-cycle adjustments are typically used torecognize promotions

5 %3 Promotion

MarketCompetitiveness

Retention

%2

Other 1 %3Temporary

Assignment

2 %5

OFF-CYCLEADJUSTMENTS

%7

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“Meets expectations” employees are receiving STIawards greater than their targets

18

108% 105% 104%

136% 130% 135%

164% 156% 164%

Execu tive Ma nag em ent Prof ession al (No n-Sa le s)

Lowest Low Middle Next Highest Highest

56%

15%

54%

14%

52%

10%

Executive Management Professional(non-sales)

Target STI(100%)

To see data for other employee groups, refer to the 2014/2015 CanadaCompensation Planning Survey

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Salary Increase Budget Communication

80%

38%

8%

18%

12%

44%

Managers Employees

Open Communication Communication on Request No Communication

The majority of employees do not receive anycommunication about the organization’s salaryincrease budget

19

PERCENTAGE OF ORGANIZATIONS

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2014 Actual 2015 Projected

SalaryIncrease

StructureIncrease

SalaryIncrease

StructureIncrease

National 3.0% 2.3% 3.0% 2.2%

Prairies 3.1% 2.4% 3.1% 2.3%

Saskatchewan 3.0% 2.3% 3.1% 2.2%

National Public Sector 2.9% 2.0% 2.7% 1.9%

Summary2014 actual increases / 2015 projected increases

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CAREER FRAMEWORKS

21

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“We need to

build ourtalent fromwithin byidentifying the rightskills and creatingcareer paths.”

“Employees are asking

for clarity onexpectations at each

step of the careerjourney as theymove up and laterally.”

“Employees are asking

for clarity onexpectations at each

step of the careerjourney as theymove up and laterally.”

“There is too

much ad hocand discretionarydeal making -leading tomanager angstand

employeemistrust”

“There is too

much ad hocand discretionarydeal making -leading tomanager angstand

employeemistrust”

The employer perspective

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The employee perspective

23

“I would love to

navigatefuturepossibilitiesstarting from mycurrent role andcompany.”

“I don’t see a

clear pathto progress in thisorganization. “

“I don’t see a

clear pathto progress in thisorganization. “

“There is no

consistencyin levels or

pay, making mequestion theorganization’spromise to me.”

“There is no

consistencyin levels or

pay, making mequestion theorganization’spromise to me.”

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Four Reasons Canadians Quit

1 Promotion opportunities elsewhere 24%

2 Lack of career and training opportunity 16%

3 Higher base salary elsewhere 14%

4 Career change 12%

24

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What is a Career Framework?

25

MERCER 26

Internal Labour Market (ILM) Maps

Promotions

5

4

2

6

3

1

HIRES EXITSCAREERLEVEL

Lateral Moves

Total Employees

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Internal Labour Market Map – Illustrative Example

Promotions

338

1,001

2,093

650

273

195Total Employees

(11.8%)

(13.3%)

(5.8%)

(16.0%)

(12.0%)

(2.2%)

(19.0%)

(14.0%)

(21.1%)

(29.9%)

(19.2%)

(10.2%)

52

65

403

221

39

(19.0%)

(10.4%)

(19.6%)

(23.9%)

(12.5%)

12(6.1%)

5

4

2

6

3

1

HIRES EXITSCAREERLEVEL

26

78

117

169

39

13

1

18

23

34

7

Lateral moves

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Internal Labour Market Map – Illustrative Example

338

1,001

2,093

650

273

195

(11.8%)

(13.3%)

(5.8%)

(12.0%)

(2.2%)

(19.0%)

(14.0%)

(29.9%)

(19.2%)

(10.2%)

52

65

221

39

(19.0%)

(10.4%)

(23.9%)

(12.5%)

12(6.1%)

5

4

2

6

3

1

HIRES EXITSCAREERLEVEL

26

78

117

39

13

1

18

23

34

7

Outside hires areusurping career

opportunities

High potentialemployees

are giving up

(16.0%)

(19.6%)403

(21.1%)

169

Promotions

Total Employees

Lateral moves

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FUTURE OPPORTUNITIES

FUTUREROLE?

CURRENTROLE

FUTUREROLE?

SALES R&D OPS MKTG HR IT FINANCE …

Employees want to explore opportunities to movevertically and horizontally within their organization

29

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Career Frameworks are becoming more common

Don't have a careerframework but planning

to implement one

Have a careerframework3 %8

3 %2

Don't and notplanning one 3 %0

30

CAREERFRAMEWORKS

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E3

E2

E1

M4

M3

M2

M1

P6

P5

P4

P3

P2

P1

S3

S2

S1

S4

Career Frameworks anchor jobs to a common verticaland horizontal structure

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Support

Professional

Management

Executive CAREERSTREAMS

CAREERLEVELS

E

D

C

B

A

CAREERSTAGES

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Competencies and job levels are most often used tounderpin Career Frameworks

40% Core and technicalcompetencies

Core competencies

Job Evaluation /Job Leveling

%5 Other2%Market

28%

UNDERPINNINGCAREER

FRAMEWORKS

%25

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Majority of organizations have a single CareerFramework

Learning & Dev. Network Architecture Applications Development ..….

ITHR

E3

E2

E1

M4

M3

M2

M1

P6

P5

P4

P3

P2

P1

S3

S2

S1

S4

33

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Short-term Incentive Targets

Career Streams / LevelsCareer Streams / Levels

5%

8%

10%

12%

15%

5%

5%

30%

28%

25%

20%

18%

Compensation ProgramCompensation Program

Frameworks can connect talent management,careers, and compensation management

34

E3

E2

E1

M4

M3

M2

M1

P6

P5

P4

P3

P2

P1

S3

S2

S1

S4

Base Salary Ranges

Career StagesCareer Stages

E

D

C

B

A

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Still room for improvement

35

Succession planning68%

Training and development65%

Performance management62%

Career pathing (vertical and/or horizontal movement)57%

Rewards (base salary & incentive management)56%

Recruitment and selection46%

Job titling32%

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Key Takeaways

36

Compensation budgets are stable, but pay forperformance is still a challenge

Opportunity for improvement in communication of annualincreases and total rewards overall

Career Frameworks have the potential to optimize thelinkage between rewards and talent management

ü

ü

üEmployees have choices and we need to help themFrame Their Futureü

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1 Mercer’s 2015 Canadian Compensation Planning Report

1-800-333-3070 or www.imercer.ca/cps

2 Mercer’s Global Compensation Planning Report

1-800-333-3070 or www.imercer.com/gcpr

3 New Graduate Pay and Student Hiring Rates Survey

Participate by September 26 and receive a free preliminary report.

3737

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Questions from the Audience

38

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Please take a minute to fill outthe Evaluation Form.

Thank you.

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