Trends and Business PlanningTad McIntosh, President and Founder , HumCap

Average college graduate receives roughly $50k per year (business degrees)◦ Chemical engineer- 65k◦ Computer Science - $62 k

Group Benefits are similar for new grads but less expensive for the company to provide based on the health risk

Competitive salary◦ Base-lined annually to market conditions

401(k) with a 4% match to employee contributions

Fully paid health premiums for all employees◦ Available Health Savings Account (HSA)

Profit sharing that compensates each person at each level based on performance of entire company◦ Delivered to team members in non-executive ranks

before being distributed to senior team members

In addition to base salary, some Accenture employees are eligible for variable pay, OT pay, and other performance awards◦ Also, Accenture equity gained through share

option grants and discounted share purchases 401(k) 6% match from Accenture with 100%

vesting after two years of service Medical, dental, disability, life, legal,

accidental death insurances Flexible spending accounts and transportation

program to use pre-tax dollars to pay health care and transportation expenses

Freezing pay was common for companies in 2009-2010◦ Only 7% of companies claim they will freeze pay for

2011◦ Technical companies will average around 3% salary

increase Majority of companies aiming to strengthen their

pay for performance programs◦ Differentiating increases between low and high

performers continues to be in focus◦ On average, for 2010, high performers received 4%,

average received 2.5%, and low received 1.1% increase.

Use of variable pay has become more widespread◦ Provides the opportunity to reduce fixed costs◦ Allows considerable differentiation of award

opportunities based on performance◦ Can motivate participants to focus attention and

efforts on critical organizational initiatives to improve productivity

Multi-year variable pay◦ A valued retention tool when low salary increases

and smaller annual incentive payout

Average annual premiums for 2010 were $5,049 for single, and $13,770 for family◦ 5% and 3% higher than the previous year,

respectively- Large company averages 99% of large firms (>200) offer health

benefits in the future 68% of small firms (<200) are likely to offer

health benefits in the future Towers Watson Survey

Major medical coverage will likely change more in future than in the past◦ 42% of employers believe that diminished benefit

packages will be a likely outcome from health care legislation

Creates opportunity for companies to ◦ Offer a more comprehensive benefits package◦ Make Choices on where to spend benefit dollars◦ Help Small companies compete with big ones◦ Be more of an anchor for companies that don’t

change

Health care cost increases have reached a plateau — but are still three times the rate of inflation

7.5%

9.7%10.3%

14.7%

13.0%

10.6%

8.5% 8.0%

6.0% 6.0%7.0%

6.0%7.0%

-3%

0%

3%

6%

9%

12%

15%

18%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*

Health Care Trend CPI-U Public Sector and Education

Average cost trends without changes to plan design and/or employee contributions would have been 8% in 2010 and are expected to be slightly higher (8.5%) in 2011.

Affordability gap widensCumulative health care costs have grown more than four times faster than workers’ earnings over the last decade, leading health benefits to become a much larger portion of employees’ total rewards.

Active Workers’ Health Insurance Premiums Workers’ Earnings

Employers are less confident they will offer health care benefits a decade from now◦ Confidence is below levels reported in 2003, when

health care cost trends were upwards of 13%

43%

59%

73%

62%57%

38%

74%

0%

3%

6%

9%

12%

15%

18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2003 2005 2007 2008 2009 2010 Public Sector

and Education

High Confidence Annual Trend

Yet confidence is higher over the shorter horizon: 71% are “very confident” about offering health care benefits five years from now.

Survive the first 12-24 months in Business Business means earning revenue not

science projects or free web apps Main goal in Business is Return on

Investment for shareholders HR and Benefits are necessary to grow but

not to start a company

Free pizza for work Stock options / Equity for work Keep costs as low as possible Don’t pay what you don’t have Plan on your money needing to last 3 times

as long as reasonable business plan Call on friends and family for help- if they

don’t help, they either don’t like you or don’t believe what you are doing will work

Some salaries can and will need to start Be creative to get going Money is not the only motivator Salary is a benefit of employment not

ownership Perks can begin to kick in Benefits can be added but are demotivating

to take away

Funding is not always needed to have a real company

Real salaries should start at A round or revenues to substantiate commercial viability

PTO is normal but usually not taken Some benefits should start

◦ 401(k)- very important long term◦ Life◦ LTD- ◦ Health

Don’t get pulled into competing with the big company benefits

Be Creative on how you implement

Do NOT overbuy too soon!

Work environment is why many people leave big companies

Be a great place to work Survey what people want Set a budget and stick to it Determine what is REALLY important to you

and the employees Free pizza

Base◦ Look at surveys◦ Look at what experience is necessary versus

wanted◦ Can you fractionalize your need?◦ Can you outsource some things ?

Bonus numbers Profit sharing

Most Funded companies use as incentive Equity is very expensive Look long term value possibility Be careful on what you do Most options end up as worthless Think Facebook story Don’t promise what you can’t legally give Consult the Lawyer that incorporated you

Everyone needs Most start too late Great benefit that is not too expensive

Very expensive bought individually Much cheaper for companies to buy LTD is a great benefit You must communicate the value You can offer this as employer paid You can offer employee paid versions

Helps fill out the benefit offering Helps people customize the plan they need Helps with pre tax / section 125 treatment Very popular with small companies Watch out for people being sold

Think Long term Think how can we start where we are and

get better every year Watch over buying at funding Be smart by using “ Been there- done That”

advisors Hire good outside advisors at all levels

◦ Lawyer- CPA – CFO- HR – ◦ Fractionalize if you can

Email questions or needs to me if I can help

◦ Tad@HumCapinc.com

◦ Tad McIntosh, HumCap

Good Luck in your career and New Ventures!