"During the downturn, poor bank performance caused compensation increases to be lower than what had been forecast," said Tim Reimink, a senior consultant in Crowe's Performance practice. "The return to salary increases meeting forecasts shows banks have a better grip on their performance expectations and have established a new normal for the post-recession era."
According to Reimink, another indicator that a new norm has been established is a drop in aggressive pay strategies. Only 10.4 percent of respondents indicate that they pay more than 10 percent above market rate, down from more than 13 percent in the previous two years. He noted that banks continue to face margin pressure and are seeing many job candidates in the market, which might explain the less aggressive pay policy.
The 2012 survey results also showed a widening of the salary increase gap between above average performers and average performers. For 66 percent of employees rated as average or meeting expectations, the average salary increase was 2.3 percent, less than the 2.7 percent increase in 2011. For the 27 percent of employees rated as above average or exceeding expectations, the average increase was 3.4 percent, which was slightly more than the 3.3 percent increase in 2011. "This gap between above average and average performers indicates that management might be doing a better job using pay to motivate performance compared to years past. However, given that more than one-quarter of employees are rated as above average, banks might be too generous when rating their employees," Reimink added. For the 7.2 percent of employees rated as below average, salary increases continued to be less than 1 percent.
Additional survey findings include:
- Commercial loan officers saw the biggest jump in total annual compensation, with a change of 17.3 percent over last year and a 38.5 percent increase over the past four years. Survey results for chief lending officers showed a 12.1 percent year-over-year growth in total compensation and a 25.5 percent increase since 2008. "Financial institutions are experiencing slow loan growth and competing for lending talent who can help grow their portfolios, which is why these positions are seeing a more rapid compensation growth than other positions," said Reimink.
- There is a large supply of candidates available to fill roles that require a lower skill set, and as a result, many of those roles saw a decrease in total compensation as the worker pool remains flooded. Customer service representatives saw a year-over-year decrease of 6.2 percent in total compensation, operations specialists made 1.3 percent less than last year and personal bankers saw a 0.7 percent decrease in 2012.
- Total compensation for CEOs grew by just more than 10 percent in 2012, which is slightly less than the nearly 12 percent increase in 2011. However, after experiencing less than 1 percent growth in 2009 and a loss of 3.2 percent in 2010, it appears that CEO compensation growth has recovered from the declines it experienced during the recession.
- Total incentive compensation paid as a percentage of total base salary has established a trend of approximately 8 percent in recent years compared with levels above 12 percent prior to the recession. According to Reimink, lower levels of financial performance for banks coupled with changing compensation practices have set a new pattern for incentive compensation.
- Employee turnover levels have rebounded to levels not seen since 2007. While some of this turnover is driven by staff-reduction efforts, the majority of the turnover is voluntary. This increased turnover might reflect the relatively slow recovery in the financial services industry.
In addition to looking at compensation, the survey also looked at human resource practices, including employee benefit costs. Total benefit costs as a percentage of total base salary increased again in 2012 to 19.7 percent of base salary. Driven by the rising cost of health benefits, more than 64 percent of respondents plan to increase employee deductibles this year and more than 67 percent plan to increase premiums. However, only 19.7 percent of respondents plan to eliminate benefit features and only 8.3 percent report that they will eliminate defined benefit plans. "This moderation in elimination might indicate that there are few opportunities left to increase the share of costs borne by employees," said Pat Cole, a senior manager in Crowe's Audit practice who specializes in human resource consulting for financial institutions.
Hiring, retaining and motivating the right employees have consistently been reported as the top human resource concerns for financial institutions for the past few years.
In addition to the national survey, Crowe prepared regional compensation reports for the Midwest and Southeast, as well as state reports for Florida, Illinois, Indiana, New Jersey, Ohio and West Virginia. For more information or to purchase the survey results, please visit www.crowehorwath.com/compsurvey.
About the 2012 Crowe Horwath Financial Institutions Compensation Survey
The 2012 Crowe Horwath Financial Institutions Compensation Survey was completed by 405 financial institutions. Using data as of March 31, 2012, the participant breakdown is as follows: 160 institutions had less than $250 million in total assets; 110 had between $250 million and $500 million in total assets; 58 had between $500 million and $1 billion in total assets; 45 had between $1 billion and $2.5 billion in total assets; 27 had between $2.5 billion and $10 billion; five had more than $10 billion in total assets.
About Crowe Horwath LLP
Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting and consulting firms in the United States. Under its core purpose of "Building Value with Values®," Crowe uses its deep industry expertise to provide audit services to public and private entities, while also helping clients reach their goals with tax, advisory, risk and performance services. With offices coast to coast and 2,600 personnel, Crowe is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world, consisting of more than 150 independent accounting and advisory services firms in more than 100 countries around the world.
SOURCE Crowe Horwath LLP