1. 2012 – 2013 COMPENSATION TRENDS WEBINAR HARRINGTON & ASSOCIATES, INC. PRESENTS

2. PROGRAM OVERVIEW  Major Issues In Compensation In 2012  Preview!  Survey Statistics  National data  South East data  Florida data  Base Salary Increase Budgets  Salary Structure Adjustments  Variable Pay  Retention Practices

3.  The slow recovery continued:  Employers spent an average of 2.8% of base salaries on pay adjustments in 2012; the same as 2011  Employers are budgeting 3.0% for pay increases in 2013  Pay adjustments continue to be lower than in years previous to the recession  Most employees (88.5%) received a raise in 2012  Employers say 9% more received increases than did in 2011  Employers say 6% fewer received increases in 2011 2012: THE HARD ROAD BACK

4. 2012: UNEMPLOYMENT MAY SIGNAL ECONOMIC IMPROVEMENT  Unemployment went up a tic in October from 7.8% to 7.9%, but analysts were hopeful since the increase was due to more people entering in the job market, not more job losses.  Florida’s unemployment level remains one of the highest rates in the country at 8.7% and new numbers will be reported in mid-November.

5.  Florida: As of January 1, 2013 the Florida Minimum Wage goes from $7.67/hr. to $7.79 /hr.  At least $4.77 /hr. for tipped employees, plus tips, up from $4.65 /hr.  National: Despite earlier signals from Congress to the contrary, no federal minimum wage increase materialized in 2012.  Alabama: Does not have it’s own minimum wage and therefore follows the federal program which requires $7.25/hr. and $2.13/hr. for tipped employees (where tips received monthly are at least $30.00). 2012: FLORIDA MINIMUM WAGE INCREASES

6.  In 2011 CPI at 3.2% was higher than the average total salary increase budget - First time since 1980!  Prices for consumers are fluctuating greatly month to month, but the price of labor is still fairly flat. 2011: CPI CLIMBS FASTER THAN SALARY BUDGETS

7.  The Consumer Price Index rose in September by 0.6%, that’s twice the increase we reported at this time last year.  The 12 month change in the CPI is now 2.0% (as of 9/12) with new numbers due out November 15 th.  The 12 month change is projected to be 2.3% by year end. 2012: CPI ON THE RISE

8. WHAT YOU PAID September 2000Your purchase cost you $173.70 Percent Change September 2011Your purchase cost you $226.89+30.6% September 2012Your purchase cost you $231.41+2.0% December 2012Your purchase cost you $232.11+.3% 2012: CPI IN PERSPECTIVE  Projected 2012 increase to be 2.3% over 2011  Energy & Food Prices are the greatest contributors to the increase, as they were in 2011

9. WHAT PRODUCERS PAID September 2000Employers purchase cost $139.40 Percent Change September 2011Your purchase cost you $192.60+38.1% September 2012Your purchase cost you $196.9+2.2% 2012: PPI IN PERSPECTIVE  Employers who produce a product are seeing costs increasing slightly faster than consumer prices.  Producer Price Index: Cost of goods produced.

10. PREVIEW! With our eyes wide open…

11. SIGNS OF BETTER THINGS TO COME: DURING RECESSION ZEROS HAD HUGE IMPACT PERCENT OF EMPLOYERS BUDGETING 0% SPENDING ON SALARY INCREASES 200928% to 42% of Employers Budget 0% Increases 201013% to 20% of Employers Budget 0% Increases 20117% to 10% of Employers Budget 0% Increases 20125% to 8% of Employers Budget 0% Increases  In most years about 3% of employers schedule “zero spending” on salaries * Depending on category of employee

12. SALARY STRUCTURE ADJUSTMENTS 20091.5% Average Structure Adjustment 20101.2% Average Structure Adjustment 20111.4% Average Structure Adjustment 20121.8% Average Structure Adjustment 2013*2.0% Average Structure Adjustment  Between 1999 and 2008 salary structure adjustments averaged 2.5% each year. SIGNS OF BETTER THINGS TO COME: SALARY STRUCTURE ADJUSTMENTS * Projected

13. 2012: MERIT INCREASES MERIT INCREASE BUDGETS AS A PERCENT OF PAYROLL 20102.6% 20112.3% 20122.6%* 2013*2.8%** * Lower than projected **Projected

14. TRENDS IN MERIT INCREASES LEVELS Year Average Percentage Increase Given Top Performers Average Percentage Increase Given Middle Performers Percentage Difference Between Increases Given Top Performers vs. Middle Performers 20103.7%2.5%48% 20113.9%2.6%50% 20124.1%2.7%52% 2012: MERIT INCREASES  Employers continue to focus on pay-for-performance  Lowest performers consistently get 0.6%

15. 2012: PROMOTIONAL INCREASES  Of companies that do not budget for promotional increases:  59% pay for promotional increases with savings from vacancies and other payroll savings  27% pay from merit budget

16. VARIABLE PAY  Organizational success continues to be the largest component of measures for variable pay plans  Employers are not shifting from their continued belief in the value of variable pay with 82% reporting they use it. (Up from 79% in 2011)  A strong commitment remains to pay for performance

17. SURVEY STATISTICS

18. BUDGET INCREASES NATIONAL DATA

19. SALARY BUDGET INCREASES BY INDUSTRY - NATIONAL

20. SALARY BUDGET INCREASES BY EMPLOYMENT SIZE - NATIONAL BY ORGANIZATION SIZE 2010 Actual2011 Actual 2012 Actual 2013 Projected 1 - 499 Employees2.5%3.0%3.2%3.3% 500 - 2,499 Employees2.5%2.8%2.9%3.0% 2,500 - 9,999 Employees2.5%2.8% 2.9% 10,000 - 19,999 Employees2.3%2.8%2.7%2.9% 20,000+ Employees2.4%2.6%2.7%2.8%

21. SALARY BUDGET INCREASE BY REVENUE - NATIONAL REVENUE CATEGORY 2010 Actual 2011 Actual 2012 Actual 2013 Projected Up to $30 Mill2.5%2.8%3.1%3.2% More than $30 Mill to $100 Mill2.5%2.7%3.1% More than $100 Mill to $300 Mill2.3%2.7%2.8%2.9% More than $300 Mill to $600 Mill2.6%2.8%2.9%3.1% More than $600 Mill to $1 Billion2.4%2.8% 3.0% More than $1 Billion to $3 Billion2.5%2.8% 3.0% More than $3 Billion to $5 Billion2.5%2.8%2.9%3.0% More than $5 Billion to $8 Billion2.6%2.8%2.9%3.0% More than $8 Billion to $10 Billion2.7%2.9% 3.1% More than $10 Billion2.5%2.7%2.8%2.9%

22. % OF EMPLOYEES RECEIVING INCREASES - NATIONAL PERSPECTIVE-

23. YEAR TO YEAR COMPARISON OF PERCENT OF EMPLOYEES TO RECEIVE PAY INCREASES - NATIONAL

24. PAY INCREASE BY TYPE

25. SALARY BUDGET INCREASE: NATIONAL VS. SOUTH EAST

26. YEAR TO YEAR COMPARISON OF PERCENTAGE OF EMPLOYEES BY PERFORMANCE RATING

27. YEAR TO YEAR COMPARISON OF PERCENTAGE OF INCREASE GRANTED BY PERFORMANCE LEVEL

28. SALARY BUDGET INCREASES FLORIDA DATA

29. AVERAGE PAY ADJUSTMENT: MANUFACTURING - FLORIDA EMPLOYEE CATEGORY 2008- 2009 Actual 2009- 2010 Actual 2010- 2011 Actual 2011- 2012 Projected 2011- 2012 Actual 2012- 2013 Projected PMMS3.5%3.0%2.9% 2.7%2.6% OCT3.6%3.7%3.1% 2.8%2.7% SMP3.7%3.1%3.0% 2.9%2.7% EXECUTIVE3.7%3.1% 2.4% 12 Companies Reporting IR= Insufficient Reporting

30. AVERAGE PAY ADJUSTMENT NON-MANUFACTURING - FLORIDA EMPLOYEE CATEGORY 2008- 2009 Actual 2009- 2010 Actual 2010- 2011 Actual 2011- 2012 Projected 2011- 2012 Actual 2012- 2013 Projected PMMS3.5%3.0%2.9% 3.0% OCT3.6%3.7%3.1% 3.0%2.8% SMP3.7%3.1%3.0% 3.3%2.8% EXECUTIVE3.7%3.1% 3.3%3.0% 36 Companies Reporting IR= Insufficient Reporting

31. PAY ADJUSTMENTS BY EMPLOYMENT CATEGORY - FLORIDA 36 Non-Manufacturing Firms Responding for 2011-2012 Actual and 2012-2013 Projected

32. AVERAGE ACTUAL PAY ADJUSTMENT FLORIDA EMPLOYEE CATEGORY East/ NorthSouthWest Florida Composite PMMS3.0%2.5%3.0%2.9% OCT2.9%3.0% 2.9% SMP3.2% 2.9%3.3% EXEC3.2%3.3%3.0%3.2% 96 Companies Responding Pay Period: 7/1/11 – 6/30/12 IR= Insufficient Reporting

33. AVERAGE PROJECTED PAY ADJUSTMENT FLORIDA NEXT 12 MONTHS EMPLOYEE CATEGORY East/ NorthSouthWest Florida Composite PMMS2.7%IR2.4%2.7% OCT2.8%IR2.6%2.7% SMP2.8%IR2.4%2.8% EXEC2.9%IR2.6%2.9% 96 Companies Responding Pay Period: 7/1/10 – 6/30/11IR= Insufficient Reporting

34. RANGE STRUCTURE ADJUSTMENTS FLORIDA & NATIONAL DATA

35. RANGE ADJUSTMENTS BY EMPLOYEE GROUP: ACTUALS & PROJECTED FLORIDA MANUFACTURINGNON-MANUFACTURING EMPLOYEE CATEGORY 2011-2012 Actual 2012-2013 Projected 2011-2012 Actual 2012-2013 Projected PMMS2.3%2.0%1.3%4.4% OCT2.6%2.5%2.8%3.3% SMP2.4%2.3%2.0%2.8% EXEC2.7%2.5% 2.6% 12 Companies Reporting36 Companies Reporting

36. ACTUAL RANGE ADJUSTMENTS BY REGION – PAST 12 MONTHS FLORIDA EMPLOYEE CATEGORY East/ NorthSouthWest Florida Composite PMMS1.4%IR 1.6% OCT2.8%IR 2.7% SMP2.0%IR 2.1% EXEC2.5% IR 3.6%IR2.5% 96 Companies Responding Pay Period: 7/1/2011 – 6/30/12 IR= Insufficient Reporting

37. PROJECTED RANGE ADJUSTMENTS BY REGION – NEXT 12 MONTHS FLORIDA EMPLOYEE CATEGORY East/ NorthSouthWest Florida Composite PMMS4.3%IR1.8%3.6% OCT3.3%1.6%IR3.1% SMP2.3%1.6%IR2.6% EXEC2.3%2.0%IR2.5% 96 Companies Reporting As of August 2012IR= Insufficient Reporting

38. ORGANIZATIONS REPORTING NO SALARY STRUCTURE INCREASE (0%) - NATIONAL

39. SALARY STRUCTURE INCREASES: NATIONAL VS. SOUTH REGION

40. 15 YEAR PERSPECTIVE! SALARY & STRUCTURE INCREASES

41. VARIABLE PAY

42. ORGANIZATIONS USING VARIABLE PAY COMPONENTS

43. FEATURES OF VARIABLE PAY AWARDS

44. REMINDER! MAKING VARIABLE PAY WORK FOR YOU  Create meaningful and measureable goals that are aligned with business strategy  Clear and effective communication with employees  Ensure employees understand the expectations and measures  Measure results and be specific  Communicate performance updates throughout the year

45. RETENTION PRACTICES

46. Compensation Program Used2009201020112012 Market Adjustments/ increase to base pay37%35%60%69% Sign-on/Hiring Bonus64%50%62%66% Employee Referral Bonus66%55%62% Spot Bonus (individual)39%36%48%51% Non-cash recognition rewards-38%41%50% Retention/stay bonus34%26%34%41% TOP COMPENSATION PRACTICES USED FOR EMPLOYEE RETENTION: IN LAST 12 MONTHS

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