VARIABLE PAY
Analysis of global patterns of at risk pay
By international standards, UK senior managers receive a high proportion of their earnings in the form of bonuses and profit share. However, this pattern does not follow for middle ranking and more junior employees.
These findings are part of an analysis by Watson Wyatt that shows the differing patterns of “at risk” pay across 57 countries. The average actual bonus and profit share as a proportion of base pay for UK senior managers is the fifth highest in the world. Actual bonuses and profit share make up on average 45% of base pay for senior executives in UK companies.
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Only in Greece (55%), Luxembourg (51%), Brazil (50%) and Saudi Arabia (46%) is this proportion higher for senior positions. The United States (also on 45%) is ranked sixth.
Below senior management level
Actual bonuses and profit share as a proportion of base pay are comparatively lower for more junior staff in the UK. For middle managers, the average bonus and profit share as a proportion of base pay is 16% while for junior roles it is 10%.
Out of the 57 countries in the Watson Wyatt report, this ranks the UK at 40th and 34th respectively.
Countries with higher proportions of bonus for senior managers are generally not the same as those with higher proportions for other staff.
For junior staff, the highest bonuses and profit share as a proportion of base pay are paid in Asia. The top three countries for this are South Korea (23%), Taiwan (20%) and Malaysia (19%).
For middle managers, companies in Egypt and Taiwan pay out the largest proportion of earnings in the form of bonuses and profit share (28%), followed by South Korea (27%).
A final word
"Bonuses and profit share have become a more important element of the overall reward package in most countries in recent years. However, there are marked differences in the size of ‘at risk’ pay compared with base pay from country to country, as well as differences in the weight given to ‘at risk’ at different job levels.
At Watson Wyatt we believe that variable pay, and in particular incentives, offer organisations a number of opportunities to manage cost and performance at a time when budgets may be tight. In particular, it enables organisations to focus limited annual review budgets on those individuals who provide the most value to the business. It can also be a retention tool for keeping top talent and drive the right behaviours from employees. However, it is not just about the right design and communication of the incentive programme that matters. In particular the role of line management is critical to the success of such programmes." - Anne G Severeyns, a senior consultant at Watson Wyatt.
Want to know more?
Title: Global 50 Remuneration Planning Report, Watson Wyatt.
Survey details: The analysis contains the latest pay and benefits information for 50 benchmark positions from a range of industries across 57 countries.
The comparative results were calculated using the Watson Wyatt Global Grading System. The roles of “senior manager” (equivalent to head of function, general manager or business unit manager in a medium size organisation), “middle manager” and “junior” (junior professional or senior technician/administrator) relate to grades 18, 14 and 8 respectively in Watson Wyatt's Global Grading job value framework. These global grades are spread across a 25-level job-worth hierarchy designed to underpin the survey job matching on a consistent worldwide basis.
Availability: The report costs €2,100 for online access and €2,300 for online plus print copy delivery and is available from Watson Wyatt Data Services EMEA, tel: +32 2 678 15 11, email: customerservice@watsonwyatt.com.
Watson Wyatt is the “trusted business partner to the world's leading organisations on people and financial issues”. The firm’s global services include: managing the cost and effectiveness of employee benefit programmes; developing attraction, retention and reward strategies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,600 associates in 32 countries and is located on the web at www.watsonwyatt.com.