Base Salaries Move into the Spotlight in Competitive Labor Market

A tight labor market is pressuring asset managers to reshape their compensation and benefits packages as more professionals consider new job opportunities. And while firms typically use bonuses to sweeten offers, base salaries are getting more attention, according to compensation consultancy Johnson Associates.

“Even [during] the financial crisis, we didn’t have as much focus on base salaries,” Alan Johnson, Johnson Associates’ managing director, told FundFire. “One of the peculiarities in financial services is that base salaries, from time to time, will lag because appropriately in asset management and other parts of financial services, they want to emphasize performance. But having unduly low base salaries is usually not a good idea,… particularly with the talent competition that we have today.”

A growing number of managers are increasing base pay by 5%, 6% and even higher, instead of the customary 3% annual raise, Johnson said during a client presentation in March. Decisions to bump up base salaries occurred in the fall of 2021, “really before we all became very in tune with the idea that inflation is very high,” Johnson told FundFire.

It’s hard to explain low base salaries during this competitive recruitment process, he added.

“It sends an odd message – you’re making excuses even before you begin the discussion,” Johnson said. “We tell clients you don’t have to have unusually high base salaries, but you need to be at least competitive, so it’s, at a minimum, a non-issue.”

Johnson’s early predictions, based on the first quarter, suggest the significant compensation increases of 2021 are unlikely this year. In the fourth quarter last year, the consultancy expected a 15% increase in asset management bonuses for that year. In 2020, those incentives jumped by 5% at the most, according to Johnson…

Similarly, managers should standardize base salaries among employees with the same role, Johnson said during the presentation.

“Many firms spend an enormous amount of energy around individual base-salary increases, but often with very little impact,” Johnson said. “If we look at… a group of investment professionals, [and] a group of operations [or] technology professionals at the same level, the salaries overlap to the point that it’s difficult to explain why the salaries are what they are.”

FundFire / April 18, 2022

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How Big a Raise You Should Give Your Employees with Inflation at a 40-year High

“I’ve had more discussions about this in the last three months than in 20 years,” says Alan Johnson, whose New York City consulting firm Johnson Associates advises major companies on pay…

In the same way, high inflation may frighten retirees, or those planning to retire, whose nest eggs look alarmingly inadequate at 7.5% inflation versus the 2% inflation of years past. “If you’re hearing medical bills are going up, rent’s going up, food’s going up, you look at your significant other and say, ‘Is this really the time we want to walk away from our jobs?’” Johnson says. If workers who would otherwise leave the job market stay, the effect will again be downward pressure on pay…

Can a company become an employer of choice by promising to keep wages inflation-adjusted?

While tempting, some say the decision may not be wise. Employers should pledge to offer salaries that are competitive in relation to the marketplace and employees’ skills. But they should refrain from promising to keep wages inflation-adjusted, Johnson says. “Sooner or later inflation will spike, the economy will tank, and then you can’t afford it. Now you’ve lied to people.”

Fortune / April 13, 2022

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How Soaring Inflation is Affecting Pay Raise Decisions

“I’ve had more discussions about this in the last three months than in 20 years,” says Alan Johnson, whose New York City consulting firm Johnson Associates advises major companies on pay…

In the same way, high inflation may frighten retirees, or those planning to retire, whose nest eggs look alarmingly inadequate at 7.5% inflation versus the 2% inflation of years past. “If you’re hearing medical bills are going up, rent’s going up, food’s going up, you look at your significant other and say, ‘Is this really the time we want to walk away from our jobs?’” Johnson says. If workers who would otherwise leave the job market stay, the effect will again be downward pressure on pay.

Can a company become an employer of choice by promising to keep wages inflation-adjusted?

While tempting, some say the decision may not be wise. Employers should pledge to offer salaries that are competitive in relation to the marketplace and employees’ skills. But they should refrain from promising to keep wages inflation-adjusted, Johnson says. “Sooner or later inflation will spike, the economy will tank, and then you can’t afford it. Now you’ve lied to people.”

Fortune / February 15, 2022

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Wall Street Opens Its Wallet to Keep Talent. It’s Not Always Enough.

Up and down Wall Street, droves of bankers are changing jobs — switching banks, moving to investment firms, taking equity stakes in financial technology companies or cryptocurrency start-ups — and sometimes getting out altogether. Pandemic-inspired ennui, blockbuster profits and a war for talent across the industry has accelerated the job churn at the country’s big banks.

“People are exhausted,” said Alan Johnson, the managing director of Johnson Associates, a Wall Street compensation consultancy. The ranks of those earning $10 million or more will grow amid competition for top performers after a bumper year for earnings, Mr. Johnson said, but “money doesn’t always make you happy.”

The New York Times / February 8, 2022

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Candidates Question Hedge Funds on Hybrid Work, Culture, Burnout

Despite market volatility this month, the industry has a strong tailwind at its back, said Alan Johnson, managing director at compensation consultancy Johnson Associates. But concerns around office location and work approaches, something people wouldn’t have talked about a few years ago, have become a much bigger issue, he added.

“The whole location and how often you have to come into the office is something that wouldn’t have happened three years ago and now it’s part of every conversation,” he said…

Amid the competitive environment, firms are now talking about employees’ mental health and the resources they have available, Johnson added.

“They’ve tried to make sure people know there are confidential resources if they are struggling,” he said, adding that “after two years people are really tired.”

FundFire / January 26, 2022

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On Wall Street, Bonuses Are Up but the Mood Is Not

“It’s wild how hot the labor market is,” said Alan Johnson, a consultant who helps financial firms design their pay programs. “You’ve got crypto, you’ve got tech,” he said, plus the ever-present “siren song of private equity,” which pays far more than banks do…

The payouts come after a go-go year that generated record revenue for banks but widespread burnout among their workers. Mr. Johnson said he counseled his clients not to expect outpourings of gratitude.

“No matter how much you pay them, people believe that with all the stress they’ve gone through, they deserved more,” he said.

The Wall Street Journal / January 20, 2022

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