Trends and Business Planning Tad McIntosh, President and Founder , HumCap Average college graduate receives roughly $50k per year (business degrees) ◦ Chemical engineer- 65k ◦ Computer Science - $62 k Group Benefits are similar for new grads but less expensive for the company to provide based on the health risk Competitive salary ◦ Base-lined annually to market conditions 401(k) with a 4% match to employee contributions Fully paid health premiums for all employees ◦ Available Health Savings Account (HSA) Profit sharing that compensates each person at each level based on performance of entire company ◦ Delivered to team members in non-executive ranks before being distributed to senior team members In addition to base salary, some Accenture employees are eligible for variable pay, OT pay, and other performance awards ◦ Also, Accenture equity gained through share option grants and discounted share purchases 401(k) 6% match from Accenture with 100% vesting after two years of service Medical, dental, disability, life, legal, accidental death insurances Flexible spending accounts and transportation program to use pre-tax dollars to pay health care and transportation expenses Freezing pay was common for companies in 2009-2010 ◦ Only 7% of companies claim they will freeze pay for 2011 ◦ Technical companies will average around 3% salary increase Majority of companies aiming to strengthen their pay for performance programs ◦ Differentiating increases between low and high performers continues to be in focus ◦ On average, for 2010, high performers received 4%, average received 2.5%, and low received 1.1% increase. Use of variable pay has become more widespread ◦ Provides the opportunity to reduce fixed costs ◦ Allows considerable differentiation of award opportunities based on performance ◦ Can motivate participants to focus attention and efforts on critical organizational initiatives to improve productivity Multi-year variable pay ◦ A valued retention tool when low salary increases and smaller annual incentive payout Average annual premiums for 2010 were $5,049 for single, and $13,770 for family ◦ 5% and 3% higher than the previous year, respectively- Large company averages 99% of large firms (>200) offer health benefits in the future 68% of small firms (<200) are likely to offer health benefits in the future Towers Watson Survey Major medical coverage will likely change more in future than in the past ◦ 42% of employers believe that diminished benefit packages will be a likely outcome from health care legislation Creates opportunity for companies to ◦ ◦ ◦ ◦ Offer a more comprehensive benefits package Make Choices on where to spend benefit dollars Help Small companies compete with big ones Be more of an anchor for companies that don’t change Health care cost increases have reached a plateau — but are still three times the rate of Average cost trends inflation without changes to plan design and/or employee contributions would have been 8% in 2010 and are expected to be slightly higher (8.5%) in 2011. 18% 14.7% 15% 13.0% 12% 9.7% 9% 10.6% 10.3% 8.5% 7.5% 8.0% 6% 6.0% 6.0% 2007 2008 7.0% 7.0% 6.0% 3% 0% 1999 -3% 2000 2001 2002 2003 Health Care Trend 2004 2005 CPI-U 2006 2009 2010 Public Sector and Education 2011* Affordability gap widens 200% 180% 160% 140% 120% Affordability Gap 100% 80% 60% 40% 20% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Active Insurance Premiums ActiveWorker's Workers’Health Health Insurance Premiums Workers' Earnings Workers’ Earnings Cumulative health care costs have grown more than four times faster than workers’ earnings over the last decade, leading health benefits to become a much larger portion of employees’ total rewards. Employers are less confident they will offer health care benefits a decade from now ◦ Confidence is below levels reported in 2003, when health care cost trends were upwards of 13% 80% 70% 62% 59% 60% 50% 74% 73% 18% 15% 57% 12% 43% 38% 40% 9% 30% 6% 20% 3% 10% 0% 0% 2003 2005 2007 High Confidence 2008 2009 2010 Annual Trend Public Sector and Education Yet confidence is higher over the shorter horizon: 71% are “very confident” about offering health care benefits five years from now. Survive the first 12-24 months in Business Business means earning revenue not science projects or free web apps Main goal in Business is Return on Investment for shareholders HR and Benefits are necessary to grow but not to start a company Free pizza for work Stock options / Equity for work Keep costs as low as possible Don’t pay what you don’t have Plan on your money needing to last 3 times as long as reasonable business plan Call on friends and family for help- if they don’t help, they either don’t like you or don’t believe what you are doing will work Some salaries can and will need to start Be creative to get going Money is not the only motivator Salary is a benefit of employment not ownership Perks can begin to kick in Benefits can be added but are demotivating to take away Funding is not always needed to have a real company Real salaries should start at A round or revenues to substantiate commercial viability PTO is normal but usually not taken Some benefits should start ◦ ◦ ◦ ◦ 401(k)- very important long term Life LTDHealth Don’t get pulled into competing with the big company benefits Be Creative on how you implement Do NOT overbuy too soon! Work environment is why many people leave big companies Be a great place to work Survey what people want Set a budget and stick to it Determine what is REALLY important to you and the employees Free pizza Base ◦ ◦ ◦ ◦ Look at surveys Look at what experience is necessary versus wanted Can you fractionalize your need? Can you outsource some things ? Bonus numbers Profit sharing Most Funded companies use as incentive Equity is very expensive Look long term value possibility Be careful on what you do Most options end up as worthless Think Facebook story Don’t promise what you can’t legally give Consult the Lawyer that incorporated you Everyone needs Most start too late Great benefit that is not too expensive Very expensive bought individually Much cheaper for companies to buy LTD is a great benefit You must communicate the value You can offer this as employer paid You can offer employee paid versions Helps fill out the benefit offering Helps people customize the plan they need Helps with pre tax / section 125 treatment Very popular with small companies Watch out for people being sold Think Long term Think how can we start where we are and get better every year Watch over buying at funding Be smart by using “ Been there- done That” advisors Hire good outside advisors at all levels ◦ Lawyer- CPA – CFO- HR – ◦ Fractionalize if you can Email questions or needs to me if I can help ◦ [email protected] ◦ Tad McIntosh, HumCap Good Luck in your career and New Ventures!