By Karen Timmins
WG Senior Vice President, Human Resources
Your company’s success depends on the ability to compete for, attract, and retain exceptional employees. Unfortunately, as the entire agriculture industry faces a tightening labor market, it’s more difficult than ever for the fresh product industry to fill essential positions.
Regions, such as California’s Central Valley, are experiencing a shrinking pool of talent as skilled labor gravitates toward tech-centric areas of the country. Meanwhile, immigration reform threatens to reduce the availability of field workers, and new minimum wage and overtime regulations create even greater pressure for agricultural employers already struggling with rising costs.
To profitably navigate these external challenges and continue to fill critical roles within your organization, you must have a comprehensive total rewards strategy as well as a clearly-defined compensation philosophy. Total rewards encompasses everything involved in the employee value proposition, including cash, benefits packages, and additional perks (perquisites) such as educational reimbursement, sabbatical leave, subsidized cafeterias and housing, on-site childcare, and wellness programs. Your compensation philosophy is then developed within the context of this total rewards package. It starts with understanding what matters most to your employees, then using base pay and incentives to better position yourself in this competitive labor market.
An effective total rewards package is a dynamic balance of science and art — the market data and the guiding principles for integrating that data — working together to help direct your spending and attract the best talent possible to your organization.
The Science: Market Data
Research, verified data and facts give you what you need to build the framework of your total rewards package. A true understanding of human resource (HR) policies, total cash compensation, benefits, and perquisites offered by employers in your labor market allow you to craft your employee programs to be competitive while remaining fiscally responsible.
Without the relevant employment market data to guide your decisions, you’re forced to rely on intuition and anecdotal information, reacting to moment-to-moment pressure with little more than gut feelings to justify any one choice over another. Salaries are set, raises are awarded, HR policies are written; all in a vacuum and without any insight into how these decisions relate to actual market rates and best practices. Data such as position-specific average base pay and industry-wide incentive program trends are critical to making well-informed decisions and getting the most value from your scarce resources. Timely and specific market data deliver key insights into roles across your entire organization, provide objective reference points to support your compensation recommendations, and help you to avoid underpaying or overpaying for talent.
The following points highlight how your day-to-day employment decision-making process can be greatly enhanced with the relevant market data:
• Analyzing your overall labor market competitiveness: Know how you measure up against other employers competing for the same talent, which incentives (health care plans, bonuses, etc.) employees care about most, and the HR practices that have the greatest impact on employee retention.
• Hiring or promoting an employee: Understand the range of what companies similar in size, business segment, ownership type, and location are paying for that same job.
• Considering pay raise requests: Determine if the employee is already fairly compensated, or perhaps even worth paying an above-market rate based on the value he or she contributes.
• Creating a new job for your organization: Gain insight into the qualifications and responsibilities other companies require for that position.
• Determining merit increases: Identify trends within the produce industry and consider potential budget adjustments in order to remain competitive for top talent.
• Adjusting your compensation mix: Understand the percent of total annual cash compensation that is delivered through an annuity (base pay) versus performance pay (incentives). Market data will help you understand the role of incentives in total cash compensation and how they differ by job responsibilities.
The Art: Integrating the Data
The art of compensation is in how you use the data. The data is simply your starting point; a guideline to set parameters from which to operate. The art is the process that happens within those parameters. You use the data to develop or refine your compensation philosophy and apply it to your culture and your employees. Start by taking a very close look at your employees and ask the right questions to help make the data relevant to each specific situation.
• What is their performance level?
• Are they meeting or exceeding expectations?
• How much value do they create for our organization?
• Are their skills and experience in higher demand than usual?
• Have they ever held this particular job before?
The answers to these types of questions, combined with the relevant market data, will help you determine an appropriate cash compensation package for each position in your organization. Depending on skills, experience, and merit, one employee’s compensation may be higher or lower than another’s in a similar role.
The art also includes navigating the political and legal landscapes, such as the impact that legislative changes have on the cost and availability of labor within the agriculture industry. Consider the following laws and political trends taking effect in 2017:
• Increased minimum wages at the state, county, and city level (SB 3 in California, Prop 206 in Arizona, Amendment 70 in Colorado), as well as tighter restrictions on ag overtime and rest day requirements in California (AB 1066).
• Expansion of California’s equal pay law (SB 1063 and AB 1676), prohibiting any compensation disparity between workers based on gender, race, or ethnicity.
• Requirements to maintain a private, qualified retirement savings plan, or enable employees to make automatic contributions from their paycheck to a California Secure Choice Retirement Savings Trust savings account (SB 1234).
• Expansion of the ACA Marketplace employer mandate to offer affordable, comprehensive health benefits coverage to full-time employees and their dependents.
• Executive branch pressure for tighter restrictions on immigration, such as President Trump’s executive orders regarding the building of a border wall as well as the call for increased interior enforcement.
These and other legislative changes will likely reduce your room for error as you calculate and plan for future labor costs, and may have a significant impact on your total rewards package and compensation philosophy. While it might be tempting to preserve profits with sweeping cuts to labor expenditures such as benefits and incentives, it’s important to also evaluate your compensation strategy within the context of labor market realities. Requiring employees to contribute more to their healthcare coverage or reducing vacation days and company-paid 401(k) contributions may save money in the short term, but could be costly in the long run as quality employees look elsewhere for a better deal.
Incorporating a balance between both the science and art into your decision-making process can help you mitigate these external pressures while still remaining competitive.
• External data: Understand market compensation rates, requirements, and responsibilities for each role within your company in order to avoid overpaying for talent in some areas of your organization, freeing up resources to help compensate for higher minimum wage and overtime costs in others.
• Internal data: Audit internal compensation rates to ensure compliance with equal pay laws by avoiding unsubstantiated pay gaps between employees in similar positions.
• HR policy communications: Demonstrate your commitment to fair labor practices through regular employee communications. Create clear HR policies that reflect both the external legal realities and your internal compensation philosophy, as well as assist employees in understanding how to avoid potentially costly breaches, such as not taking adequate rest days or unnecessarily applying for ACA subsidies.
Transitioning to a Data-Driven Process
While the long-term payoff of adopting a more proactive approach toward your organization’s total rewards strategy can be substantial, the transition to a data-oriented process is not always easy. Seeing the market reality through the data may shine a light on past mistakes as well as ongoing systemic problems, including favoritism and overcompensation to those with long tenure.
It’s important to recognize these errors and quickly refocus on making better decisions in the future. Help managers throughout your organization understand the value of market data by demonstrating how it can be used to estimate competitive pay and attract the best candidates for the jobs they are looking to fill.
Western Growers is committed to providing the market data you need to make the best employment decisions possible and compete for top talent within the industry. The Western Growers 2017 Professional Compensation and HR Practices Survey will give you the insights you need to recruit and retain outstanding employees, make key budgeting decisions, and plan a competitive total rewards strategy. This is the only compensation survey specific to the California and Arizona specialty crop industry, with distinct data sets to help you focus on the information most relevant to your company’s size, business segment, ownership type, and location.
All participants will receive a free copy of the 2017 survey results. To learn more, visit agsalary.com.