Updated on: March 12, 2020
Changes to executive compensation follow collective bargaining outcomes and this approach is problematic!
This article, the first in a series of several, has been written to emphasize the importance that APEX places on executive compensation and the lack of internal competitiveness caused by salary compression. An upcoming article will explain how the approach to establishing future economic increases could be improved while positively impacting the level of effort and cost associated with implementing retroactive salary adjustments.
With regard to internal salary competitiveness, the pendulum continues to swing between reasonably acceptable executive salaries and the salaries of unionized or senior unrepresented employees. The result of collective bargaining settlements is a situation where some of the most historically important feeder groups earn a salary that is comparable to that earned by entry-level executives. For example, candidates from the EC-07 group and level have, over the last 5 years, filled 17.7% of all EX vacancies. Following the recent collective bargaining settlement, the salary maximum for an EC-07 is $126,059 as compared to the EX-01 salary maximum of $132,200, Similarly, FI-04 candidates have, over the same period, filled 11.2% of all EX vacancies and currently earn a maximum salary of $130,181. In both of these examples, the level of salary compression between the feeder group and the EX-01 level is significant enough to concern some applicants and it is concerning to Executives who manage employees who occupy these groups and levels who earn a similar salary but are responsible for a much bigger job with additional accountability and the likelihood of less work-life balance based on the average number of hours that executives have reported working weekly.
APEX believes that a better compensation practice would be to ensure that there is ongoing and meaningful differentiation between executive and non-executive salaries, beginning with updating the current executive rates of pay, which were last increased effective April 1, 2017 – nearly three years ago.
APEX is recommending a three-year (April 1, 2018 to March 31, 2021) increase to executive rates of pay, mirroring the yearly increases negotiated in the recent collective bargaining settlements, leaving time to closely examine the viability of a new approach to establishing future economic increases for the Executive community that would take effect for April 1, 2021. This next step will be elaborated on in an upcoming APEX Newsletter.