PW SHRM Law Summit Presentation Presented by HR 3D/Solutions 10/5/12 11  3 HR3D/Solutions

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Conference Board: U.S. Salary Increase Budgets to Rise 3% for 2013 Based on a sample of 316 companies, the Conference Board's U.S. Salary Increase Budgets for 2013 survey also reveals a median increase of 3 percent in 2012, just like in Projections for 2013 are 3 percent as well— an indication that the economic recovery has not yet picked up enough strength to substantially raise salary budgets.U.S. Salary Increase Budgets for 2013 Despite the relatively low level of projected salary budget increases in 2013, the danger of inflation eroding the real value of the increase appears slight, according to the Conference Board. 44  3 HR3D/Solutions

Conference Board Salary Projections U.S. salary increase budgets remain historically low, but projections for 2013 show a modest increase, according to The Conference Board annual salary increase budgets survey report released today. For the second straight year, the median salary increase budget is 2.5 percent. Projections for 2013 show a modest increase to 3 percent. (Salary increase budgets refer specifically to the pool of money that an organization dedicates to salary increases for the coming year. Generally, it is represented as a percentage of current payroll.) The lowest median salary increase budget forecast for 2013 is in the transportation industry—2.25 percent for exempt employees and executives. The insurance industry is also below the 3 percent median overall forecast for non-exempt salaried, exempt, and executives, while the banking sector reported the lowest projected 2013 increase for non-exempt, hourly employees. Across industries, the 2013 forecast for salary increase budgets showed little variation, with no employee group in any industry projected to exceed the overall median of 3 percent. 55  3 HR3D/Solutions

According to Aon Hewitt's survey of more than 1,300 U.S. companies, base pay increases for salaried exempt workers were 2.8 percent in 2012, up marginally from 2.7 percent in Salaries have inched upwards year-over-year since 2009 when pay increases reached an all- time low of 1.8 percent. Pay increases are expected to rise slightly in For executives, salaried exempt and salaried nonexempt workers, Aon Hewitt projects base pay increases of 3.0 percent in 66  3 HR3D/Solutions

According to Mercer’s 2012/2013 U.S. Compensation Planning Survey, the average raise in base pay is expected to be 2.9 percent in 2013, up slightly from 2.7 percent in In 2011, the average increase also was 2.7 percent, which was up from 2.3 percent in The survey also found more than 95 percent of organizations are planning to award base salary increases next year. 77  3 HR3D/Solutions

Aon Hewitt Survey Shows Marginal Rise in Salary Increases in 2012; Historical U.S. Salary Increases (Prjocted) Executive1.40%2.40%2.80%2.90%3% Salaried EX1.80%2.40%2.70%2.80%3% Salaried NEX1.90%2.40%2.80%2.70%3% Non Union Hourly2%2.40%2.70% 2.90% Union2.20%2.50%2.60%2.50%2.60% 88  3 HR3D/Solutions

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U.S. Total Salary Budget Increases, by Employee Category Actual 2012 Mean Actual 2012 Median Projected 2013 Mean Projected 2013 Median Nonmanagement (hourly nonunion) Nonexempt salaried Exempt salaried Officers/executives Source: WorldatWork.  10  3 HR3D/Solutions

Salary Budget Increases Actual 2012 Projected 2013 India11.2%10.7% China9.1%8.8% Brazil7.7%7.2% United States2.8%3.0% Spain2.8%2.9% Japan2.6%2.7% Source: WorldatWork.  11  3 HR3D/Solutions

Distribution of Salary Budgets –World at Work Distribution of Total Salary Budget Increase Responses, Actual 2011 vs. Actual %.1-1.9%2-2.9%3-4% %7% Nonexempt Hourly Non Union7.00%6.00%4.00%4%36.00%37%49.00%53%3.00%4%1.00%1% Nonexempt Salaried7.00%5.00%4.00%4%33.00%29%52%56%4%5%1%0% Exempt Salaried6.00%5.00%4.00%4%33.00%35%52%56%4%5%1% Officers/Executives10.00%8.00%4.00%4%29.00%26%50%55%6%5%2%1%  12  3 HR3D/Solutions

Base Salary Increases by Job /Performance Level Culpepper Table 2g: U.S. Base Salary Increases by Job Level, Function, and Performance United States 2012 Actual 2013 Budgeted / Projected n Median (with Zeros) Average (with Zeros) n Median (with Zeros) Average (with Zeros) Job Level Executives %2.81% %2.95% Director & Manager Level %2.84% %2.97% Individual Contributors: Salaried & Exempt %2.79% %2.95% Individual Contributors: Hourly & Non-Exempt %2.72% %2.86% Job Function Sales %2.48% %2.65% IT / Technical / Engineering / Scientific %2.83% %2.98% Job Performance High Performing Employees %4.31% %4.45% Average Performing Employees %2.79% %2.87% Low Performing Employees %0.94% %0.95% Source: Culpepper Salary Budget Survey, August 2012, © Culpepper and Associates, Inc.  13  3 HR3D/Solutions

Promotion as a % of Salary Culpepper  14  3 HR3D/Solutions

Historical U.S. Base Salary Increases United States Average (Mean) Base Salary Increase 2005 Actual 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Actual 2011 Actual 2012 Budgeted / Projected Includes Salary Freezes (with zeros) Excludes Salary Freezes (without zeros) Includes Salary Freezes (with zeros) Excludes Salary Freezes (without zeros) Includes Salary Freezes (with zeros) Excludes Salary Freezes (without zeros) Includes Salary Freezes (with zeros) Excludes Salary Freezes (without zeros) Includes Salary Freezes (with zeros) Excludes Salary Freezes (without zeros) All Companies in U.S. (Aggregate)3.5%3.9%3.8%3.85%3.93%1.66%3.05%2.38%2.88%2.92%3.01%2.91%3.04% Industry Sector Technology Sectorsn/a 3.82%3.94%1.23%3.01%2.46%3.01%3.13%3.29%3.17%3.20% Life Science Sectorsn/a 4.03%4.11%2.46%3.42%2.55%2.90%3.03%3.17%2.82%3.05% Healthcare Sectorsn/a 3.75%3.83%2.28%3.01%2.29%2.49%2.54%2.70%2.66%2.69% # Employees 1 to 100n/a 4.13%4.35%1.40%3.40%2.24%3.36%3.06%3.46%3.25%3.52% 101 to 500n/a 1.83%3.14%2.55%3.03%3.13%3.27%3.02%3.18% 501 to 2,500n/a 1.77%3.11%2.40%2.80%2.89%3.00%2.85%2.94% 2,501 to 10,000n/a 1.52%2.87%2.32%2.75%2.86%2.97%2.74%2.83% Over 10,000n/a 1.51%2.69%2.31%2.60%2.66%2.84%2.70%2.81%  15  3 HR3D/Solutions

Summary of 2013 Salary Increases Mercer expects that among midsize and large employers across the U.S., the average raise in base pay is expected to be 2.9 percent in 2013, up slightly from 2.7 percent in 2012 and 2011, and 2.3 percent in Mercer expects Hay Group forecast showing an average 3 percent salary budget increase for 2013, for a net inflation-adjusted pay gain of 0.8 percent, after employees saw an estimated 0.6 percent inflation-adjusted net loss in Hay Group forecast WorldatWork similarly predicted a 3 percent expected increase in 2013 up from 2.8 percent in 2012, in line with The Conference Board's findings. WorldatWork similarly predictedThe Conference Board's findings. Aon Hewitt expects 2013 base pay to rise 3 percent for executive, salaried exempt and salaried nonexempt positions, and to increase 2.9 percent for nonunion hourly and 2.6 percent for union positions. Aon Hewitt expects 2013 base pay Towers Watson Data Services Salary Budget Survey of 857 U.S. companies, conducted in June and July of 2012 shows companies are planning pay increases that will average 2.9 percent in 2013 for their salaried non-management employees Towers Watson Data Services Salary Budget Survey Culpepper predicted a 2.95 percent expected increase in 2013 up from 2.8 percent in 2012 Culpepper predicted  16  3 HR3D/Solutions

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The overall average turnover percentage for all companies in 2011 was 13.7% The overall average turnover percentage for all companies in 2010 was 15.17% The overall average turnover percentage for all companies in 2009 was 12% The overall average turnover percentage for all companies in 2008 was 16.9% The overall average turnover percentage for all companies in 2007 was 15.2% In the 2006 survey the overall turnover rate was 19.4%. In the 2005 survey the overall turnover rate was 19.2%.  20  3 HR3D/Solutions

Government Contractors Avg. Turnover 2009 Avg. Turnover 2010 Avg. Turnover 2011 # Firms 2011 Less 100 Employees8.0%7.04%12.05%6 100 to %23.03%18.86% to 1, %14.06%13.20%6 1,000 to 5, %14.66%13.36% to %14.16%15.03%6 14.4%15.61%15.52%43  21  3 HR3D/Solutions

Turnover Cost Formula High turnover can sabotage your company's bottom line. To estimate the cost of turnover in your firm, use the following formula. Select a department or job function that has a lot of turnover. Use an actual number or, lacking exact statistics, estimate the number of people who left the job or department during the last 12 months. Write that number below on Line 4. The average cost of turnover is 25 percent of an employee's annual salary (Line 1) plus the cost of the benefits (Line 2) you provide. Typical benefits amount to about 30% of wages.* The total cost per employee (Line 3) is the total of Line 1 and Line 2. 1Annual Wage: x.25 = 2Annual Wage: x.30 = 3 Total turnover cost per employee (add Lines 1 and 2): 4Total number of employees who left: 5 Total cost of turnover (multiply Lines 3 and 4): Source:Saratoga Institute * Total cost of a complete benefits package on top of payroll.  22  3 HR3D/Solutions

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