Midwest banks have com compensation packages but could restructure benefits to attract younger employees
HUMAN RESOURCE professionals and compensation advisors agree: Midwest banks compare well to other industries when it comes to compensation and benefits. There is a mismatch, however, between the incentives Midwest banks offer and the type of employees they need. With the average age of leadership increasing, banks need succession plans. If bank managers do not align their benefits packages to attract younger, skilled employees they risk missing out on one of the most important parts of a succession plan: the successor.
Banks are often lowerthan-average for compensation and higherthan-average for benefits, said
The issue banks need to be concerned about is the age of the workforce, she said. "As I go to banks and look around, senior management is not often under 55," she said. "I think bankers are conscious of that issue."
Competing for young hires
Some Midwest banks' compensation and benefits plans do not line up well for new and young hires when comparing vacation day benefits, Deziel said. Some banks ask new employees to wait a year before they take a vacation, a sick day or PTO, she said. "A bank that does so is hurt from a competitive standpoint," she said. "If you have a young candidate with children, they get sick and so do their kids. If that employee has a choice between two banks, one that has a year-long, no-time-off period and one that doesn't, which do you think the candidate will choose?" she asked.
Deziel also said she suggests banks switch to a "Paid Time Off" model for vacation benefits to remain competitive. She estimates that less than 50 percent of the banks within UBB's footprint, which extends from
Two weeks of vacation is competitive for a new employee, Deziel said. "If banks do switch to the PTO model, however, two weeks of paid time off that splits days between sick days, vacation days and personal days, is not competitive," she said.
About 42 percent of banks that participated in UBB's survey for 2014 have a PTO plan, Deziel said. The average annual number of PTO days a new hire can accrue is 19; PTO may include vacation, sick, floating holidays, and personal days.
Banks also need to be careful not to lose a competitive edge when docking sick time for a doctor's visit, Deziel said. "Most banks have language in their employee handbooks encouraging employees to schedule a doctor's appointment after work, which is great," she said. "But then at some banks if the employee just has to leave a little early for a doctor's appointment, they are forced to use a half day of sick time. The bank may prefer the employee to be at work seven hours rather than four. The employee also wants to minimize sick time used. The policy is a lose-lose," she said. On the other hand, some banks are quite generous with PTO, Deziel said, noting that a few even allow sick time for employees' pets.
For time off, the banking industry has always stacked up well because of bank holidays. All banks have 10 paid holidays. "But now that number is getting reduced," she said. "I have quite a few customers using a Federal Holiday as a training day or meeting day. I see the number going down to nine, or even eight, paid holidays."
Banks' health insurance plans have not been a good fit for young, single employees. Banks have previously opted for "Cadillac" insurance plans. For young, single hires these plans aren't a good fit because they don't usually need a doctor's services. They ended up paying their portion of the premium for good insurance they don't use. Under the Affordable Care Act, however, pricing pressures are attracting banks to highdeductible plans that happen to fit young, single employees well, Deziel said.
The changes brought to the health insurance industry by the Affordable Care Act have not been easy for banks, Deziel said. "I am seeing that bank employees are having to pay more out-of-pocket, in the way of
While the cost of providing health care coverage continues to increase, banks pay an average of 78 percent of health insurance premiums for "employee only" coverage, according to UBB's survey of community banks for 2014. For family coverage, on average, banks covered 60 percent of premiums. The percent of banks offering a high-deductible health plan increased to 61 percent in 2014 from 57 percent in 2013.
Deziel said it is a very feasible step for all banks to add a high deductible plan. "Many of my customers only have those plans," she said.
Regulations created by the Affordable Care Act make tax law look like child's play, Deziel said. "The ACA is and has been very stressful for many banks," she said.
On banks trying create health care strategies to get around ACA regulations, Deziel said she doesn't suggest it. "I have a few customers trying to get creative," she said. "The hard part about it is that the
Banks in UBB's footprint have two benefits not usually offered to employees by other industries, Deziel said. Many banks allow employees to carry over unused sick days year-over-year. In time, employees can use the accrued pool of sick days should they need to be away from work for an extended period due to medical issues.
Midwest banks also are beginning to offer identity theft protection. UBB has about 125 banks offering ID TheftSmart, UBB's identity theft protection service, to customers. About 85 percent of banks offering ID TheftSmart to customers also offer it to employees. About 50 percent offer it to employees for free, said
After hackers gained access to Target's servers and stole some 40 million credit card numbers in November of 2013, Henry said UBB customers have been increasingly interested in protecting both employees and customers. "We have signed up close to 60 banks this year," he said, noting that banks which enroll in ID TheftSmart get more than an ID theft service. "We offer an end-to-end solution including training, marketing and the actual product," he said.
Heavy competition for loans has increased competition for loan officers with established books of business, said
Llewellyn said equity is a poor retention tool. "I worked with a bank where a lender owned 15 percent of the bank," he said. "The lender demanded a pay increase and threatened to leave if he didn't receive it. The bank responded saying, "You can't leave; you're an owner.' The lender replied, 'watch me.' And he left and started a bank across the street.
"Once an employee has equity, the retention aspects are lost," Llewellyn continued. "The problem with equity is that there is no ability to liquidate it. Less than 30 percent of banks do buy-backs. I may have 10,000 shares of bank stock and it may grow to 15,000, but if there's no liquidity it loses its value to me."
Llewellyn said he suggests incentives which vest at a future date. "So many times, loan officers are rewarded based on how they perform today as opposed how the loans will perform in the future," he said. "I suggest a performancebased incentive plan. For example, an employee would receive
"The four-year waiting period allows time for bad loans to reveal themselves," Llewellyn continued. "The amount in the reward account would be reduced if a loan doesn't perform like it needs to."
A performance-based structure would work for any key executive of the bank, Llewellyn said. He gave the example of bank IT officers, a talent pool that's becoming increasingly sought-after. "IT is a transferable skill. These individuals can sometimes make
Llewellyn said that because IT is a transferable skill, paying IT officers based on a benchmark from within the banking industry can be misleading. "I have seen banks benchmark an IT officer with an MBA at
Banks can spend money on incentives the employee doesn't need if they structure incentives based on stereotypes, Llewellyn said. "If you are going to spend the dollars, you need to get the best use of them," he said. "My boss is 60 years old; you would assume he is focused on retirement. He actually is more concerned about paying for college than retirement. So for my boss, he may not want a retirement plan. He may want a plan that helps him pay for college. You don't know unless you ask him."
Llewellyn said he also worked with a CFO in his thirties who wants to retire when he is 50. "I would never think to talk with him about retirement," he said.
Executives rank compensation fourth on the list of benefits that are important to them. More important are corporate culture, career stability and market opportunity, Llewellyn said. "Soft benefits can be huge as well," he said.
Banks have found benefits like telecommuting, flexible hours, and even the ability to participate in nonprofit organizations during work hours, can be effective bargaining chips for retaining or attracting employees. These soft benefits, Llewellyn said, can be excellent, low cost attraction tools, particularly for banks in rural areas.
On the Affordable Care Act: ''I am seeing that bank employees are having to pay more out-of-pocket, in the way of