National 2021 Credit Union Compensation Forecast

As part of its continued commitment to ensuring that its clients’ salary administration programs remain competitive, D. Hilton gathers annual research to forecast salary range and merit increase budgets for the upcoming year. The following memo is intended to assist clients in preparing compensation and benefits budgets for 2021.

Since 2002, D. Hilton has gathered information from the national financial services and retail marketplaces. With the economic crisis of 2008, cumulative data became less useful to many of our clients due to the number of credit unions facing difficult staffing, compensation and benefits decisions relating to the need to decrease expenses and stabilize capital positions. While some organizations believe 2021 budgeting will resemble 2008, D. Hilton sees significant differences.

The crisis driver in 2008 was the impairment of the financial system. The challenge in 2020 is coronavirus spread. The economy’s strength at the beginning of the year and the financial system’s ability to lend during this pandemic have helped us avoid a full-blown financial crisis to date. While there was a pretty significant economic downturn in March, quick and aggressive fiscal and monetary responses resulted in a strong rebound.

Ultimately, the constraint to a full recovery is a medical one, which means we may need a vaccine to help push the economy back to pre-coronavirus employment levels. With that unknown, it appears many U.S. companies are building a medical recovery into their 2021 compensation budgets. While national unemployment hovers around 10.2% today, financial services unemployment is 3.6%. This makes freezing budgets a riskier move than it may have been in 2008.

D. Hilton began the data forecasting process by speaking with 150 of our clients, ranging in asset size from $100 million to more than $10 billion, to explore how the impact of the COVID-19, shrinking fee and investment revenue coupled with significant deposit growth have impacted strategic planning, growth options, expense control and human resource administration. And the responses are significantly different based on individual credit union tolerance of risk and capital positions. Simply put, under-to-moderately capitalized credit unions must focus on safety and soundness initiatives while well-capitalized organizations can continue to grow their operations and take more risks.